In Part 1 of Demystifying Credit Cards, we investigated the secret of the consistently increasing credit card balance. Now that you know what causes your credit card debt to keep growing, how about we investigate strategies to chop down the debt. Our ultimate objective to assist you with rebuilding and fortify your financial house.
Cutting Down Credit Card Debt
- Above Minimum Payment: We touched on it a bit in Part I, however let us return to the issue of the minimum payment. If you owe $5000 on a credit card that charges 20% APR and you are only paying off the minimum payment of $25, you are not making an imprint in your debt. According to interest calculations, you owe $92.9 in interest. If you are only paying $25, you are not in any event, paying off half the monthly interest you owe and the balance you owe is added to the total debt and used to calculate new interest charges. The key here is to pay the amount you owe in interest + extra (goes towards principal). Thusly, you are making a gouge in the interest paid while paying off the principal as well. It very well may be something you pursue (like an additional $5/month) yet your goal is to pay interest principal each month and click https://www.interpages.org/what-should-you-do-if-you-cant-make-your-credit-card-payments/.
- Highest APR Card: If you owe on different cards and want to execute a plan to pay down your credit card debt, it is ideal to start with the card that has the most noteworthy interest rate. For example, if you have card An at 20% and credit card B at 22.5%, you actually want to pay the minimum payments for both. Nonetheless, if you have extra money to put towards paying off your gouge, apply it to the one with the most elevated interest rate. The card with the most noteworthy interest rate generates the most interest due. I different words, it accumulates interest faster. If you have credit cards with the same interest rates however different balances, start with the one that had the most noteworthy balance. If everything is equal, pick one.
- Cash: You have had the opportunity to learn the cash habit. If you cannot utilize your bank card or ATM card to make a purchase, because you probably would not have the money, then, at that point you really should not be at the checkout register. Step away! Except if it is for necessities like food and medicine, if you cannot afford to utilize cash then it is a purchase you can do without.
This does not mean that we do not overspend in necessary areas. if you resemble me, you venture into a supermarket to purchase a jug of milk and some apples and you walk out with pasta, 10 loaves of bread and the whole yogurt department.
This is where a budget proves to be useful. It is a habit you need to learn – creating and sticking to a budget. It is one that I am as yet learning (although I am getting into the habit).
Other than helping you to check your spending – or possibly tack it better – a budget gives you ideas on areas you can manage, to generate extra cash flow – to decrease that, quite, bothersome credit card debt.