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How to Reduce Credit Card Debt

There is one strange thing about our age: for some reason, we are willing to pay for real goods and products with virtual or electronic money. And then, when time comes to pay to our credit card issuer, we pay the amount of electronic money, plus a substantial interest rate and an annual fee. In other words, modern day consumers have to realize that the “convenience” of using electronic money usually costs a lot of hard cash.

If you feel that you need a bigger wallet to accommodate all of your credit cards, while at the same time your paycheck is getting thinner each month, perhaps it’s time for you to think of some strategy to reduce your credit card debt. This brief intro below highlights some easy and feasible steps towards your financial freedom. Remember that following the way to freedom, be it financial or any other kind, requires perseverance, persistence and prudence.

Step One: Examine Your Credit Cards

For a start, make a list of all your credit cards, including the minimum payment due on each card and its term, starting with the smallest balance and then moving down to the largest. Remember that credit card minimum payments go down as the balance does, which in turn gives you a longer pay-off time.

Step Two: Avoid Using Credit Cards

Take all of your credit cards out of your wallet, put them in a locker, then lock it and swallow the key! Well, if this sounds too outlandish to you, then just stop using your credit cards for a long period of time. Remember that as long as you are using your credit cards, your debt will keep on building.

This one is commonsense – if you can’t get out of the habit of using credit cards, keep track of why and how often you make purchases with them. Make a list of all goods and services you pay with your credit card and go over it from time to time. Consider if you needed the items or you just got carried away. Do you tend to shop unnecessary stuff when you are nervous, sad, or stressed? Take a good look at your shopping habits and leave your credit card at home if you feel that things can get out of control. Always carry some cash with you, you don’t really need a credit card to pay for your McDonald’s meal. Remember that when you pay in cash, you use money that you actually have.

Step Three: Pay off Debt

Once you’ve paid off a part of your balance and your monthly payment has decreased, it will be wise if you keep on paying a good deal over your monthly minimum payment.

If you receive a Christmas bonus, do not rush to your travel agent to book this expensive seven-day cruise to the Caribbean but use the money to pay off your credit card debt, instead. You still owe money, and you may be tempted to use your credit card for unexpected and unwise purchases while on a holiday. Get rid of your debt and then plan for a holiday (car, home renovation, etc.)

Step Four: Pay off Debt with Your Savings

If you plan to use some savings to pay off your credit card debt, remember not to use your retirement funds, because the penalties are prohibitive. And one more thing, do not drain your savings account to pay off your credit card debt. Leave some cash in there just in case.

Step Five: Say Farewell to the Card You’ve Paid Off

As soon as you’ve paid off one of your credit cards, get rid of it at once (just to make sure you’ll not use it again and accumulate fresh debt) and apply the minimum payment to your next credit card. Needless to say, do the same with all cards that you have.

Step Six: Follow the Rules

Follow the six steps strictly! Occasional fits of shopping frenzy may turn more expensive than you ever thought.