by Peggy Tee

Created on: January 15, 2010

Most consumers have at least one, if not more, credit cards in their wallets and purses. In recent years credit cards have become easily accessible and popular as a quick, hassle free type of loan. Credit cards are convenient debt instruments but like all other debt instruments, if not properly managed can lead to spiraling interest charges and a mountain of insurmountable debt. These steps will help to manage and eventually eliminate credit card debt

 Step 1: Assess your total credit card debt

Collect the most recent statement of all your credit cards. Online statements will show the most up to date balances and are preferred over paper statements. Often, seeing the balances on credit card statements can be intimidating but this step is necessary if you are to manage your finances adequately. List each card and detail the total amount owing, the minimum monthly payment, interest rate and available credit.

 Step 2: Consolidate your debt

To reduce the amount of monthly repayments and reduce interest charges, shop around for a new low interest credit card. Transfer all your balances onto this new card. New cards often have promotions such as a year’s interest free period on balance transfers; however be wary as the interest rates on these cards can skyrocket after the first year. Some of your existing credit cards may allow balance transfers; this is helpful if you have a low interest rate card with sufficient available credit. Transferring high interest balances to low interest cards can save you in interest payments.

Step 3: Prioritize your payments

Once you have your credit cards consolidated into as few low interest accounts as possible, prioritize the credit cards or loans that have the highest interest rates first. For these high interest rate cards, set aside a lump sum each month that is at least double the minimum payment and pay them down until the balance is zero. If you still have one or two low interest rate cards, do not neglect these – pay at least the minimum payment each month, plus any extra you can afford. Even one or two dollars on top of the monthly minimum charge will help to whittle your debt down.

Step 4: Budget savings

The key to managing credit card and eliminating debt is to channel savings into paying debt off. Until your credit card debt is fully paid down, you shouldn’t be trying to save. Wherever you can find some flexibility in your expenses, whether in cutting back on morning coffee, refraining from buying an extra pair of shoes or going out on the town twice a month instead of every weekend, every penny counts. If you are serious about eliminating credit card debt, you have to be disciplined about saving to pay it off.

Step 5: Cash is king

The last and most important step in trying to manage and eliminate credit card debt is to stop using your credit cards completely. It may be difficult to wean yourself off easy credit, but until you can afford to pay off your credit card balances in full each month, keep your cards in a locked drawer at home and use cash or direct debit only for all transactions.

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