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Small Business CardsSummary: Believe or not, you don't even have to be human to be offered a credit card. Banks are so desperate to increase their market share and profits that they end up offering cards to the family pet. Of course, that was a case of bad research by the bank's sales team and it sounds hilarious. Unfortunately, it is just as easy to get into debt and end up in a situation you can't see a way out of. In this article, we will be looking at strategies to reduce (or even eliminate) your credit card debt.
Eliminate Credit Card Debts: Change Your Spending Habits
If you want to eliminate credit card debt and ensure you stay out of debt, the first thing you need to tackle is your expenditure. There are many strategies to help you control your spending, including drawing up a budget, using cash to pay for your purchases rather than a card and learning to differentiate between needs and wants.
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 Westpac Low Rate Card | A simple low rate credit card by Westpac featuring a 13.49% p.a. interest rate. | 1.9% for 9 months (reverts to 13.49%) | 3.99% for 6 months | $0 annual fee for the first year ($45 thereafter) | 21.49% | |
The first step to getting your spending under control and to eliminate credit card debt is to draw up a budget and then stick to it. First, write down all your monthly expenses, including everything from your groceries, bills and even the coffee and newspaper you buy each morning. You might be surprised to find out how much you spend including the smallest of purchases. While a couple dollars every day doesn't sound like much, when you add them up you will find you are spending hundreds on something you don't actually need.
The easiest way to draw up a budget is to write down all your expenses in one month. Keep all your receipts and put them in a spreadsheet every day. At the end of the month you will have an accurate picture regarding what you spend. You can then decide which areas you can cut back on.
No one is saying you have to live like a hermit and never spend on anything fun, but if your main goal is to eliminate credit card debt then you need to put your wants on hold for a bit. It will be a lot more fun to go out to dinner and pay for it in cash without worrying that you will be paying 16% in interest charges for the next five months for the privilege.
Once you have deducted your expenses from your income, don't be tempted to use any remaining cash for wants. Instead, use it to pay off your debts faster which will help you eliminate credit card debt a lot quicker and give you a lot more free cash that you can put towards a savings account, for example.
To get your spending under control even further, try using cash to pay for your purchases. More and more people rely on plastic to pay for groceries and utilities leaving cash to be quite a rarity. But it has been proven that people tend to spend a lot less when they are paying with cash. I dare guess this is psychological because when you pay with cash you can actually see how much you are spending.
It is also quite important to start understanding the difference between your needs and your wants. Food, shelter and the cost of electric are needs, the newest LCD TV is a want. So, rather than spending without thinking, you need to get your spending under control and realise that if you want to eliminate credit card debt you can't buy everything in sight because you are justifying it to yourself as a need. At the very least, wait 24 hours before making such a purchase because it will give you time to ponder and you will find, more often than not, that you don't actually need a new blender since your old one works just fine.
Pay Off Your Debts First
Don't be caught in the trap of paying just the minimum every month on your card because that usually covers just the interest charges. You should be paying at least 5 to 10% more every month so you can start reducing the principle as well.
Once you finish paying off one card, and it is generally wise to start with your highest interest rate card first, roll over the payments you were making on the first card to your next card. So, if you were paying $70 on your first card every month and $30 on your second, then take the $70 and put it towards the payments on the second card, which will allow you to eliminate credit card debt much faster.
To eliminate temptation, cut up all your cards except for one, the one with the lowest interest. This way you won't be tempted to use your other cards when an "emergency" crops up.
Debt Consolidation
You can also eliminate credit card debt by consolidating all your debt onto a single card, namely the one with the lowest interest. This will help you by reducing the number of payments you need to make every month, as well as cutting down on interest charges.
Try and find some good balance transfer credit cards, as these offer extremely low introductory rates for 6 months and over, ranging between 0 and 5% per annum, which will allow you to cut down your debt significantly while saving hundreds or even thousands in interest costs.
Use Your Savings
You might balk at the idea of using your savings to eliminate credit card debt, but what's the point of earning 5% on your savings and then paying out 16% on your credit card debt? In the end, you are losing money and if you use your savings to eliminate your credit card debt then you will automatically make 16% on the same money, which is a lot more than any savings account can offer you.
Consolidate with Home Equity
Consolidating your credit card debt into your mortgage should probably be the last resort. While the interest on your mortgage is a lot lower than what you are paying on your credit cards, it will take a lot longer to pay off your debt and when you work it out, you might end up paying even more in interest costs. However, if there is no other way, then this is a strategy that might help you get out of the black hole that is credit card debt.
No matter what strategy you choose to eliminate credit card debt, remember that the only way to ensure you don't end up in the same situation again is to change your spending habits and use your credit cards responsibly.
