Credit cards are an important and useful instrument in managing finances but, for many, debts can swiftly get out of hand. If you find yourself in this situation, reducing credit card debt effectively can suddenly seem like an insurmountable task. It is possible, however, to take control and reduce your credit card debt by implementing a few simple but effective management tools.
Reduce your Debt
- Make a realistic budget. This can often be the most overwhelming step, because it means taking a serious look at your financial situation. Tracking your monthly expenditures and income in a spreadsheet, however, will show you exactly how much you can afford to direct into reducing your credit card debt. Plus you’ll be aware of where you’re spending your money, and you can decide what to cut back on if need be.
- Focus on one debt at a time. While it is important to know where you stand, reducing credit card debt can seem impossible if you take too wide a view. Focusing on one debt at a time gives you an achievable goal to work towards. Consider tackling the card with the highest interest first, while paying only the minimum on any other cards in the meantime.
- Be prepared to negotiate. Picking up the phone and speaking to your lender might be all it takes to have your rate reduced, especially if you’re a long-term customer. Having your rate reduced a few percentage points might not seem like a big win, but it can mean hundreds of dollars of savings over time. By the same token, speaking to someone over the phone or in person could help you consolidate your debts or set up a manageable payment plan. You’ll never know unless you ask.
- Be consistent. Once you’ve got a plan in place, stick to it. If you’ve decided to focus on paying off a single card, commit to paying off more than the minimum amount each month. If you’re cutting back on spending to help reduce your credit card debt, resist the temptation to splurge. These are the hard yards but you’ll be glad you stuck in there once you’re debt-free.
- Don’t panic. Reducing credit card debt is stressful and it’s easy to lose your head. Try to remember that your debt is temporary and can be brought under control. If you’re struggling to get back on top, consider speaking to a financial adviser who can help you put together an action plan that best fits your budget and lifestyle.