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How To Eliminate Credit Card Debt
Article By Guest Author
How to eliminate credit card debt fast
with a debt-killing factor?
Credit card debt is ruining the lives of millions of Americans. Credit card sharks keep on overwhelming them with skyrocketing interest rates of up to 24%. Credit card debt makes the banks richer and at the same time, makes borrowers more hapless. The most significant problem that the consumers face besides those outlandish interest rates is making the minimum monthly payments for their cards. As a result, they desperately look for ways to eliminate credit card debt.
Take an example. You have a credit card with an outstanding balance of $5,000 and the credit card provider is asking for an interest rate of 19%, which is not at all unusual in the present day economic conditions. You are needed to make a monthly minimum payment of 2% of your balance. If you just keep on making this payment, it would require almost 37 years to become debt free. You need to pay the company the $5,000 that you owed along with a huge $14,767 in extra interest payments. If this situation seems to strike a chord and you have too much credit card debt, you can get rid of it faster than you think.
Stop using your cards
The first step is the most difficult one. You need to stop using your credit cards altogether. If you have 2 credit cards, destroy the one with the biggest balance and retain the other just for contingencies. Subsequently, you should make more than the minimum payments on one of the credit cards each month till the time it's paid off. Given below are some tips to do it:
Create a debt-killing factor (DKF)
To eliminate credit card debt fast, you should initially produce a debt-killing factor. Start by reviewing your monthly income and debts including your expenses on utilities, foodstuff, gasoline and entertainment. How much is left with you that you can manage to spend on your cards? You should fix a practical goal for a figure to sum up with the minimum monthly payment.
If you can generate more money to sum up with your debt-killing factor by making some adjustments or lowering your entertainment expenses, this would help you pay down your bills sooner. Most consumers, if they have a disciplined approach towards their spending, can take 5-10% of their net earnings and utilize it towards their debt-killing factor.
Start using the DKF
Suppose you make a decision you can collect an additional $50 for your debt-killing factor each month. You have 2 credit cards, one with the aforesaid $5,000 balance and another with $2,000 balance. In the beginning, you’d deal with the second that has a minimum payment of $40.
If you pay the minimum for the $2,000 card and it carries an interest rate of 19%, it would take nearly 21 years to pay it down. If you add $50 to the minimum and pay $90 each month, you can pay off this whole debt in only 28 months. In addition, you would save more than $4,000 on interest costs.
Most credit cards come with different minimum payments and interest rates. If you want to work out the time needed to pay off your existing credit card debt, based on your balance, interest rate and minimum payments, you can use a credit card payoff calculator.
Keep in mind the key to effectively get rid of debt is to fix a goal for generating your debt-killing factor. Decide on something that wouldn't make handling your money hard and stick with using it towards your selected debt each month.
