Too much credit card debt results in low credit scores.
It seems as though you’ll never get out from under all those credit card bills doesn’t it? You make a $50 minimum payment on one card, only to see the balance drop by a whopping $5.00 or so….wow….talk about discouraging. At this pace, you’ll possibly have your bills paid off by the time you reach 70! That’s of course assuming you never charge another dollar, which you know is a fantasy. It’s a great goal in a perfect world, but probably not gonna happen.
Once you have multiple credit cards with high balances, you are stuck in a vicious cycle. If you can only afford to make the minimum payment, then 7/8th’s of your payment is going to go to interest and you’re never going to get anywhere in reducing your principal balance. You know you need to do something about it, but what?
Contact your creditors…
It can’t hurt to call all your creditors and ask if they’ll please be kind enough to reduce the interest rates they’re charging on your account. Right now, even the credit card companies are in the midst of a meltdown and they’re cutting back credit limits right and left because some folks are completely defaulting on their debts.
If they hear that you’re working on a plan to try to pay them off, hopefully they’ll be inclined to work with you and possibly reduce your interest rate to help you out. The lower your interest rate is on all your accounts, the faster you’ll be able to pay them off.
Click Here for a Free Script on Negotiating Lower Payments with Creditors
Start by evaluating your expenses…
You got yourself into this mess because you’re charging more than you earn. While it’s fun to go out and buy whatever you want, whenever you want it, at some point it all has to be paid back…..with interest…..that’s kinda like taxes…you just can’t avoid it.
Do you really need that Venti White Mocha, non-fat, no whip, 180 degrees, every day on the way to work? Yeah, yeah, I know…..it wakes you up…..but guess what? You can turn on your coffee pot and fill up your travel mug before you leave, or if that’s too much work, the grocery stores have those coffee singles now. Just boil some water, dip the “tea-like” coffee bag in there, and off you go with portable caffeine…..easy schmeezy. You just saved $3.50 or so…..times 5 = $17.50 a week….times 4 = $70 a month! Hey….you could use that money to pay extra on a credit card bill and see a bigger principal reduction!
How about that $6.00 Guacamole Burger they sell at Carl’s Jr.? Isn’t that the best burger you’ve ever tasted? Throw in some fries and a coke and not only will you get hardening of the arteries, (though the avocado is really good for your hair I’ve heard) but you’ve got about a $9.00 lunch. If you cut that out every day, by the end of the week you’ve saved $45.00 and by the end of the month, you’ve saved $180.00! That’s a nice chunk of change! Just imagine how much principal reduction you’re going to see now!
Are you starting to get the picture here? Just cut out those two things and you have $250.00 extra every month! That can put a good dent in those high credit card balances. Imagine how much more you could save if you just think about the things you buy that you don’t really need. Remember, you don’t have to do this forever….it’s kinda like a diet…..just loose the weight, then you can snack once in awhile within reason, without putting all the weight back on.
Make the “Withdrawal Symptoms” less acute…
First you have to break the “habit” of charging all the time. This in itself is something that requires conscious effort. To help you do this, budget yourself around $100 a month that you’ll put aside in CASH if you want to splurge on lunch or that Pumpkin Spice coffee that ONLY comes out during the holidays. I know you have to have your “fix” once in awhile or else this whole concept is going to go down the drain. Use this money when you are having a “craving” and you just “gotta have it”. This will help alleviate those withdrawal symptoms and make it easier for you to stay on track. Just remember, when that $100 for the month is gone…..no more treats for you, so space it out.
Second tip….carry just one credit card in your wallet for emergencies only. Leave the rest at home. If you don’t carry them with you, even if you do get the urge to spend, you won’t be able to! Oh, by the way, an emergency is defined as something like your car broke down….not Macy’s “one day” sale. Trust me….there are sales going on all the time. Besides….you’ve got enough shoes to wear for the next 10 years I’ll bet!
Pay down the credit card with the lowest balance first…
Work on paying off your debt by making payments on the credit card with lowest balance first. Once you have that account paid off, use the extra money you were spending on the previous account and apply it to the next credit card you have with the lowest balance. Then keep making payments on that account until it’s paid off, and so forth. By doing it this way, you’ll feel a sense of accomplishment that you’re actually getting somewhere, which will give you more motivation to keep on track.
The benefits of paying off your credit card debts…
The results of your efforts will show up as an increase in your overall credit scores. As your scores go up, you’ll have more clout with your creditors. Call them again and ask for those interest rate reductions on the accounts you have remaining. Folks with the highest scores, get the most benefits…so use that to your advantage! Don’t be afraid to call every other month or so and ask for a rate reduction. What’s the worst that can happen? They say no???? No big deal….you’re not in any worse position than you were before you called. If their answer bothers you, you can boycott them after your account is paid off…..that’ll show ‘em!
Don’t close your accounts after they’re paid off…
Remember, it’s not wise to close accounts that have zero balances, unless you can’t trust yourself to leave the card alone or at one point you got “credit happy” and have way too many open accounts. (You know like… Old Navy, Kohls, Mervyns, Sears, Macys, Target…those cards you got because you got an extra 15% off?)
If you do have too many, and know you really should get rid of some of them, close the most recently opened account first, and the second most recently opened account next…and so forth.
Your credit scores like a long credit history and positive, open, active accounts contribute to that history. Just charge $20 on the card every 3 months or so to keep it active and reporting to the credit bureaus. Then PAY IT OFF when the statement comes in. Do this, and you’ll be on your way to an 850 FICO credit score in no time!
For more information on Increasing Your Credit Score:
http://RepairCreditTrauma.com
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