How to Pay off Credit Card Debt

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Reducing Debt - How to Avoid the Pitfalls of Creeping Debt
Reducing debt usually isn't a high priority for people until they have already gotten into trouble with overspending. Using a few basic guidelines, and debt calculations, can help you see when your debt load is getting into the danger zone.

Budgeting Guidelines

Creditors use budgeting guidelines when reviewing and approving credit. If your debt exceeds the financial communiti... Read debt consolidation article



Debt counseling - How to File for Bankruptcy
In the 21st century, many men and women find themselves struggling to keep their heads above water financially. With ever mounting debt, these people oftentimes need to seek relief by filing for bankruptcy. Perhaps you are such a person who is fighting to make ends meet. As a result, you may be wondering how to file for bankruptcy.

1. The first step in learning how to file for bankruptc... Read debt consolidation article



How to Pay off Credit Card Debt
When considering many of the inventions that we use regularly, the credit card is a relatively new idea; the first credit card that could be used at more than one merchant was issued in 1950. Frank McNamara started the "Diner's Club" credit card company with about 200 card holders, and it was also the start of the vicious cycle many credit card users fall victim to: charging purchases when you don't have the cash to buy them, and then struggling to keep up with the monthly payments because of high interest rates and spending outside of your means.

The average credit card debt held by the typical American is over $8500. As any credit card holder knows, the interest on a credit card causes you to pay more than double the amount you've spent on the card, if you only send the minimum payment and never make any late payments. That number increases when you are late sending payments, thanks to the addition of "late fees".

Some people attempt to play "credit roulette" to pay down their credit. This is a game where you take out a loan to pay off a credit card, or you transfer credit card debt from one card to another, hoping to take advantage of a lower interest rate or promotional offer. While this will work for awhile, eventually you will have difficulty getting new offers and places to transfer the debt to, or you'll miss the fine print on one of the offers and end up paying more interest than you thought, defeating the purpose of the balance transfer.

So how can the average individual pay off their credit card debt without bankruptcy, without joining a credit counseling service (some credit counseling services are very helpful, but beware of others who charge high fees to combine your credit card debt and end up costing you more money than you would have paid on your own!) and without having to get second and third jobs?

One of the best techniques for paying off credit card debt (and other debts as well, for that matter) is the snowball technique. In the same way that a snowball gathers more snow and grows as it rolls down a hill, your payments to your creditors will grow as you pay off one debt and then apply that payment to your next creditor.

Make a list of each of your creditors, including their minimum monthly payment, the total amount owed, and the interest rate you are being charged. The debt that has the least amount owed will be the first creditor you will concentrate on paying off. You'll pay the minimum amount owed on each of your accounts except for that one, sending as much as you can to this creditor to pay it off.

For example, let's say you have three credit cards. Credit card one has $7,000 owed at 20% interest, and a minimum monthly payment of $80, credit card two has $5,000 owed at 18% interest and a minimum monthly payment of $45, and credit card three has $2500 owed at 21% interest with a minimum monthly payment of $30. You're going to send minimum payments to credit card's one and two, and send as much as you can afford to credit card three, until it is completely paid off. Let's say you can afford to send $100 to credit card three. Once you've paid the account off, write the company and cancel the account. This removes it as "available credit" on your credit report and helps your credit score. So now you have an additional $100 a month.

You'll now concentrate on credit card two, which is now your lowest debt, now slightly less than $5,000. The payment you'll send to credit card two will be $145, since you had already been sending the minimum amount of $45, and you're adding the payment from the first card that you paid off. The snowball has gathered more snow! Now, once you've paid off your second credit card, you will have an additional $145 per month to send to your last credit card, to which you had already been sending $80. The new payment to credit card one is $225 per month- almost three times the minimum amount due.

Using the snowball technique is not an overnight solution, but you most likely didn't obtain all of this debt in one night, either! It is an easy method to apply, and will get you out of debt much faster and at less interest than if you just sent the minimum to each card every month, and works much more effectively than trying to send an additional few dollars to each account every month.

This article has been provided courtesy of Creditor Web, http://www.creditorweb.com

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Simple Steps to Get Out of Debt

Step 2 - Understanding the Impact of Debt

Knowing the full impact debt is having on your life will help you understand how truly important it is to get out of debt and will help keep you motivated to pay off your debt. This article will help you to understand the consequences of debt, both financially and otherwise.

Let's start with viewing the financial cost of debt. Compounding interest has been called the "Eighth Wonder of the World", and I hope after reading this article you'll see why. Say you purchase an $80,000 house on a 30-year mortgage at 6% interest. Over the life of the loan you'll pay a total of $172,670.55, over double the price of the home. If you were to purchase the same home with a 15-year loan at 6%, you'll pay about an extra $200 per month, but the total cost of the loan will be $121,515.38, saving you $51,155.17. Could you use an extra $51,000? You can see how borrowing money can cost you much more than the amount you borrowed, and by paying it off sooner you can actually save your self a lot of money.

That's just half of the equation though. Say you opted for the 15-year mortgage, but instead of just having an extra $51,000 in spending cash, each month you continued to "make your mortgage payment" of $ 675.09 by investing that same amount for the second 15 years at 6% return per year. At the end of the same 30-year period, instead of just having your house paid for, you'd have your house paid for and an extra $196,328.80 in cash. That should help with your retirement.

The previous example is dramatic because of the amount of money involved, but sadly as far as amount borrowed compared to amount paid, it is a modest example. Let's look at an example with a credit card. As stated in the previous article, the average American household has $7,500 in credit card debt, at an average interest rate of 18%. Paying off this $7,500 of debt by making the minimum payment, which under the new law is 4%, you will pay $11,915. This is a drastic improvement over the old law of 2% minimum payment which would have cost you $28,863. I can not stress enough how much paying a little bit extra each month drastically reduces the total amount you pay.

There are other impacts to debt besides just financial ones. The first is that it adds to stress. At a minimum, it reduces the amount of money you have to spend each month, making it more difficult to get by. Depending on how bad the situation is, it could cause a lot more stress from bill collectors constantly harassing you, to possibly having your possessions repossessed or having to file for bankruptcy. It is also one of the leading causes of arguments between married couples and can even lead to divorce.

In addition to the financial, social and mental strains debt adds, it can also reduce your freedom. How, you ask? For one, it can hamper your ability to get approved for future loans. For example, if you want to buy a house, you may not be able to if you have a large amount of outstanding debt. Or, say you want to make a career change that will require you to take a temporary pay cut. If a large portion of your monthly income goes towards paying off debt, this may not be an option for you.

This article has been provided courtesy of Destroy Debt, http://www.destroydebt.com


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How to Pay off Credit Card Debt
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