Ask a friend what resolutions they made for 2007 and your bound to hear
them reply "Pay off my credit cards." Ask them how they planned on
reaching that goal and many of them will not have a clear cut answer.
The obvious first
step to paying off credit card debt or paying down credit debt load is to
cut back or eliminate the use of your credit cards. For some people this
first step can often be the most difficult. If you’re used to spending
freely with plastic and worrying about the consequences later, it’s
difficult to break free from this "buy now, pay later" attitude.
To gain control of
their careless credit card spending habits, some people cut up their
credit cards therefore making it impossible to use them. Others lock up
their credit cards or hide them in a safe place and vow to use them only
in an emergency.
The second step to
paying down credit debt is to pay more than the minimum balance due. Most
credit card companies require a minimum monthly payment of 2.5% of the
outstanding balance. For example, if you have an outstanding balance of
$1100.00 on a credit card charging an Annual Percentage Rate (APR) of
18.9% your minimum monthly payment would be $27.50. It will take you 66
months or 5.5 years to pay off your balance of $1100.00 making the minimum
payments. The credit card company will make $676.94 in interest from your
use of their credit card.
Monthly payments
are purposely kept low by the credit card companies so that they can earn
as much as possible from the interest rate charged to you the consumer.
Paying just the minimum payment will keep you tangled in credit’s web for
years and years to come.
If you’ve been
paying only the minimum due month after month, ask yourself this question,
"Do I have an extra $10.00 I could apply to this month’s payment?" I’m
sure that most of us could find some way to come up with an extra $10.00
for the month. Try cutting out a few cups of coffee or lunches at your
nearby fast food outlets and in no time flat you’ll have saved up the
extra money that you need.
Now, it’s time to
unveil "The Simple $10.00 Debt Elimination Solution." Take that extra
$10.00 and add it to the minimum monthly payment above, therefore making a
payment of $37.50. By adding just that $10.00 a month to your minimum
payment, you’ll trim 23 months or nearly two years off of that credit
debt! On top of that you’ll save $277.00 in interest alone! That’s money
you can put toward savings or paying off other debts. Imagine how much
you’d be able to save if you applied this same simple strategy to each of
your other credit card debts!
Paying down credit
debt doesn’t always mean having to make huge monthly payments or
sacrifices. It just takes some basic planning and a simple effective
strategy to make it work.
© 2004,
www.yourfreecreditreportnow.com
About The Author
James H. Dimmitt.
James is editor of "TO YOUR CREDIT", a weekly free newsletter to help you
manage your personal finances. Subscribe to the newsletter by visiting
http://www.yourfreecreditreportnow.com.
