Five Ways to Escape from Credit Card Debt
The banks have done their research... they know how convenient it is for you to carry around credit cards instead of cash. And the cards are shiny, with nice logos and pictures on them too.
Ah, the joys of carrying around plastic money. These cards with the logos on them fit so neatly into your wallet. Paper money just seems so unnecessary in today's world of easy electronic payments. In your wallet or purse right now, there are probably 2, 3 or even 4 major cards, all with specific purposes, and with their own history attached as to how you came to have them.
However, there's just that one little thing that's bugging you about your cards, and it's getting harder to ignore every month. You flinch every time the next card statement comes in the mail. You cringe when you open the statement and see the swelling amount they call "Total Balance Outstanding." It sure is outstanding!
It all seemed so easy while you were in the shop - using the card was so simple. Now though, facing that ever-fatter amount each month is chipping away at your peace of mind.
Yes, you guessed it, you're trapped in the steely claws of rapidly growing credit card debt, which itself could ruin your personal finances and place you into a debt level of critical proportions! So what do you do next?
One thing NOT to do is nothing... You must accept reality and plan your exit strategy to extricate yourself from this credit card debt-trap before it takes over your life. Below are five actions you can do initiate today to reverse your situation:
Only Spend What Have in Your Hand/Account
Some recovering credit card spenders have a tough time with this one, but it's an easy concept to put into practice. Spend money that you have in your bank account. If there isn't any money available to buy a certain item, you simply won't be getting that item right now.
This mentality definitely goes against the spend until you drop mantra out there, but in order to free yourself from mounting credit card debt, you must come back down to earth and recognize that you aren't wealthier than what you have in your checking or savings account.
Implement a Monthly Budget
Importantly, in the headline above we used the word "implement..." for a reason, rather than just "make a budget". You have to put your budget into play. Don't just stick it in a drawer and forget about it. Make notes, modify it as you go along, it's a dynamic equation that changes all the time, so you need to be flexible too. Just make sure you use it!
Your budget needs to list how much money you currently bring home after-tax each month, and what your expenses are in terms of your rent/mortgage, utilities, groceries, car leases, insurances, credit card bills and other outgoings. Notice how much as a percentage that your cards are sucking out of your monthly income... it’s scary, and it should be... most of its just interest, and not much comes off the principal. Banks do this on purpose, so they earn more money out of you, and you're locked into those repayments over the long term.
Usually the card repayments are about 2% of the closing balance... that's per month, not per year, so if you annualise that 2%, the interest rates are massive. Plus, you’re hardly scratching the surface of the principal. If you’re honest with yourself, you're probably still paying for purchases that you've used up or have been completely forgotten about. Your credit card debt is not a convenience any longer. It’s tying you into long term payments to banks who could potentially ruin your so-far-unblemished credit rating if you step out of line.
Your budget should help you to regain control of your finances, as long as you accept that the bulk of your disposable income should go as a priority to purchasing necessities. A relatively minor portion should be allocated to your "wish list".
Change the Way You Think About Credit
Why use real money when credit is so much simple? Until this point, having one or more credit cards to use whenever you felt like seemed like a logical idea. It's simple to see that you never have to think about paying for the entire purchase right away. The banks are happy to allow you to keep on making those minimum payments on the closing balance each month. Plus you get all those frequent flyer points so it's a win-win right!? And so it's okay for you to buy those extra things you think you need right now, even if it chalks up another $200 onto your debts – you don't need to worry that you have no money in the bank account to meet those expenses, your credit card provides you with the means of obtaining just about anything you want, whenever you want!
Right?
Well, if that's how you previously thought about your credit cards, now is the time to wake up to yourself, and smell the coffee! You know that each time you whip out your credit card, you're pushing your finances deeper into debt. In fact, you're burying your own financial freedom deeper into debt.
Maybe you didn't see it that way before, but it's a fact. Your currently unchecked “laissez-faire” spending habits are digging you into a bigger and bigger debt hole. If one or more credit cards are over the limit, it's a big mistake to keep digging into debt, by using more credit. You need to make a decision NOW, that you're going to pay down your current card debts. Don't allow yourself any more spending, because you digging yourself further and further into that big, deep hole that you never be able to climb out of.
Target Your Debts One-by-One
A good strategy that many people find useful in coping with a large credit card debt is to target one debt at a time for quick elimination. Look at your statement to find out which credit card that has the highest interest rate, and make up your mind to pay over the minimum amount, and direct as much money as possible to that particular card each month, and get rid of it as a priority.
Just making your minimum payments lock you into paying the banks so much more over the long term, due to those higher interest rates. Once you clear each card, you'll have more money left over at the end of each month, so the amount you can afford to pay off should "snowball" and you'll be able to get rid of each consecutive card faster.
Remember, once you've cleared each card, cut it up and never use it again. If you use it - you've wasted all your time and effort. Many people fall for this trap too.
As the saying goes, it won't happen overnight, but eventually, you'll be free of this card debt, then you can turn your attention to the next card, and so on.
Seek Professional Help
If you really are struggling to get out of the debt-hole and back on your feet, seek help from a professional company that can give you a helping hand. Avoid bankruptcy, and Part 9 debt agreements, as they are similar to bankruptcy in so many ways. But there are companies like www.NoBankruptcy.com.au that can help buy you the time you need to regain control.
Having done all this its vitally important that you now must stay the course and commit to total credit card debt elimination. Don’t borrow more money to consolidate your debts, as this is not a good long term solution, it’s just a short-term band-aid. You’re still in debt!
Getting out of your credit card debt won't be as much fun as when you were buying up a storm, but once you realise that shedding debt is essential to your own personal financial freedom, you'll be a debt elimination champion, with amazing powers to keep you on track and out of the credit card debt trap forever.
