There are thousands of people all over the world currently trying to trim their spending and draw in their financial horns thanks to the recent global credit crunch and the on-going recession. For most people however that task is made doubly difficult because before they can trim their outgoings they need to clear any debts that they might have accrued when times were better and credit was easier to find. Normally the vast majority of these debts will be credit card and store card related and the those kind of credit card debts unfortunately bring with them high interest rates.
Deciding to clear those credit cards is an important step to getting out of debt, but it is also often extremely difficult to do. Indeed once you sit down and organize all your credit card bills into one place and start calculating how much you need to repay the whole thing can sometimes appear a little bit intimidating. But don’t worry too much. If you follow these five steps you will soon see that after a couple of months everything looks a lot better.
(1) Organize Your Debts
This is the first step in getting yourself debt free and is important. Sit down at a table and collect all of your credit card statements (including store cards) together. Organize them into separate piles and ensure that you’ve included all of your outstanding accounts. Now add up the total outstanding bill and brace yourself, it might be more than you thought!
(2) Calculate Your Repayments
The next thing to do is to work out exactly how much you’re going to need to pay off every month. Firstly, add up the total cost of all of the minimum payments on each card. This figure is the amount you absolutely must pay. If you don’t your debt will go up, rather than down as you will face punishing charges and extra interest as well as seeing your credit rating affected. If you think you wont be able to clear the minimum payment then you should give the credit card companies a call, explain your situation and negotiate a repayment schedule that you can afford. This is a far preferable option than not making your payments, not talking with the credit card companies and ending up with prohibitive charges and the interest piling up. If you can however, see if you can pay off a little more than the monthly minimum on each card as this is one way to clear your debts far more quickly.
(3) Look at Ways to Clear Debts Quicker
The next thing to do is look around on the Internet and see what kind of deals are being offered by other credit card companies. There are normally hundreds of deals around, offering very low interest if you transfer your outstanding balances to their credit card. Many even offer 0% on balance transfers and if you find some of these, snap them up. Either way, select the very best interest rates on the market, for the longest introductory periods (they normally revert to full interest after 6 months) and read very carefully through their terms and conditions to make sure there are no catches you need to be aware of. After this, ensure that you make yourself pay off as much as you possibly can every month. Put every last penny into your credit cards rather than leave savings in the bank. Chances are that you will be paying out far more interest on those credit cards than you are receiving from those savings and high interest accounts. Alternatively see if you can get one large personal loan or home equity loan to clear the debts from all the cards at once. Once again, the chances are that the loan interest on such a loan would be far less than the interest you are paying on the cards.
(4) Clear Cards with Highest Rates First
If you are able to clear more than the bare minimum and have a bit of extra cash to clear more debt, ensure that you clear the card with the highest interest rates. If you have savings, don’t think to yourself that you are doing the right thing by not touching them.
(5) Tear Up All Cards Until You Are Out of Debt
However you clear the debt, whether through gradual, patient month by month repayments or one consolidating loan, make sure that you never ever let them build up again. If you know you are bad with credit cards then get yourself a debit card and nothing else. If you want to save a credit card for emergencies then keep one but tear it up and leave it at the bottom of a draw somewhere. That way you can still use it on the internet or phone but can’t take it out with you and spend freely on it.
Alex is a freelance copywriter. He likes to write about cricket and jazz but these days seems to be mostly writing about finance and payday loans.