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5 Easy Steps To Reduce Credit Card Debt

In these tough economic times, millions of Americans are over their heads in debt and wondering how to reduce credit card debt. There are many approaches you can take and be successful. Here is a simple and straightforward way to reduce your credit card debt and reclaim your financial future.

Step 1 – You have to know where you are right now – financially speaking. Find all of your most recent credit card statements and sum the total of the balances. Many people really don’t know how much they owe. This exercise will show you exactly how difficult the task of climbing out of debt will be. In many ways, this is the hardest step – taking your head out of the sand and facing up to what your really owe.

Step 2 – One by one, call each of your credit card companies and see if they will give you a lower interest rate. Of course not all will do this, but some will. You have to adopt the attitude that every penny counts, because it does. For example, if your credit card debt is $10,000 at an interest rate of 10%, your monthly payment will be $461.45 a month to pay if off in two years. But if your interest rate is only 6%, your monthly payment will be only $443.21 a month. That’s a difference of over $18 a month for one card. This step alone can reduce your monthly credit card debt, even if you do nothing else. If your credit card company refuses to lower your rate and your credit is good, you can still find credit card companies willing to let you transfer your balance to them at a lower interest rate. You can then close our your old card.

Step 3 – with your new and hopefully lower interest rates, list the cards in descending order by interest rates. Your plan is to pay off the balances with the higher interest rates first working your way down to the card with the lowest rate. Prioritizing your payments in this way is the fastest way to reduce your credit card debt.

Step 4 – Calculate the minimum monthly amount that you can pay on each card per month. Then, each month, for every card except the one with the highest interest rate, pay the minimum amount due for that card. For the one with the highest interest rate, pay the most that you can. The extra amount that you can pay will depend on your income. But, remember, if you only pay the minimum, you will never get out of debt. So, if you have to cut luxuries somewhere else to make more than the minimum payment on this card, do it. Then spend the money you saved by increasing the extra amount you pay on this credit card.

Step 5 – As you pay off each card, cancel it. Do this until you get down to two cards. A big part of the problem caused by credit cards is that people have too many of them making it hard to keep track. One or two is really all that the average person needs. As a bonus, by lowering the number of credit cards you have, your credit rating will probably improve letting you qualify for even lower interest rates on your remaining cards.

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