18 October 2007

Cut debt

Five Easy Steps to Credit Card Debt Elimination




For many consumers, credit card debt elimination can seem like mission impossible. When you're thousands of dollars in debt and trying desperately to find a light at the end of the tunnel, the outlook can be quite bleak. Fortunately, no one is beyond help when it comes to breaking free from credit card debt. Here are five easy steps that will have you on the road to credit card debt elimination in no time.



1. Get All of Your Credit Card Statements Together



If you're serious about credit card debt elimination, the first thing you need to do is gather all of your credit card statements together and begin creating a "debt elimination" spreadsheet.



What's going to go on this spreadsheet? You'll want to note how much you owe on each credit card, the interest rate and whether that rate is an introductory teaser rate or a long-term rate. If any of your credit card rates are currently on an introductory time line, make note of when that rate will expire and what it will go up to when it does.



2. Figure Out How Much You Can Afford Each Month



Once you know exactly where your debt stands, it's time to form your game plan. This is critical if you want to pursue credit card debt elimination in the quickest and most efficient manner possible.



First, take a look at how much you can afford to put towards your debt each month. Add up all of your monthly expenses (not including the minimum monthly credit card payments you must make). Take all of your other expenses (include rent/mortgage, car payments, insurance, gas, groceries, utilities, phone, etc.) and add them up.



Once you have your monthly expenses added up, deduct them from your income and see how much you have left over. Take as much of that amount as you possibly can and put it towards your credit card debt elimination plan.



For instance, let's say you have $400 a month left after all of your monthly expenses have been paid. Take $350 of that (leave $50 for emergencies, etc.) and put that towards paying off your credit card debt.



3. Addressing Your Minimum Monthly Payments



The next step towards credit card debt elimination is adding up all of the minimum monthly payments for all of your credit cards. For instance, if you have three credit cards, all with a minimum monthly payment of $75, your total minimum monthly payments would be $225.



If your credit card allocation were $350 each month like the scenario we outlined above, you'd be in okay shape so far. However, if your minimum monthly payments were $400 and you could only afford $350, then you have a serious problem and you need to start cutting out expenses. This may mean turning off your cable till you've achieved credit card debt elimination or foregoing your Starbucks runs, but it will be worth it in the long run.



4. The Plan of Attack



Now that you know exactly how much debt you have and how much money you can afford to pay off that debt each month, it's time to form your plan of attack.



First, take the total of your minimum monthly payments and subtract it from what you have allocated towards credit card debt elimination. So if you have minimum monthly payments of $225 and a credit card debt elimination allocation of $350, your remaining balance would be $125. Take that $125 and apply it towards the credit card with the highest interest rate.



Once the credit card with the highest interest rate is paid off, you're going to take the money you were paying towards that card each month (in this case, it'd be the $125 plus the $75 minimum monthly payment) and pay that $200 towards the card that now has the highest interest rate in addition to the minimum monthly payment. Keep repeating this process until you have achieved total credit card debt elimination.



5. The Fruits of Your Labor



Once your credit cards are all paid off, take half of what you were paying towards your debt and put it into a savings account. This will help you avoid having to rack up credit card debt in the future.



What are you going to do with the other half? Take that half and apply it to the things you were doing without while pursuing credit card debt elimination. After all, once credit card debt elimination is achieved, you do deserve to treat yourself.




For more tips on credit card debt, saving money and avoiding getting taken, check out CreditCardTipsEtc.com, a website that specializes in providing credit card tips, advice and resources.

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