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Slash Credit Card Debt
author David Berky
How much do YOU owe on your credit cards? (are are you afraid to look)
It is estimated that the average American family is now over $7200 in debt just on their credit cards. That debt generates an interest charge of over $105 each month if your card charges the average 18%. If you have missed a payment or made a late payment (even by one day!), you may be paying up to 27% interest or over $157 each month. What is your debt ratio? Visit our debt center to learn more. Don't forget to Get a free copy of your credit report.
Most credit card companies require a minimal payment towards the card balance. Minimal payment meaning from $10 to $20 a month. To pay off a $7200 debt at $20 a month you will not pay off this debt for 29 years...how much time do you have?
And what about those interest charges? Paying off a $7200 credit card debt charging an interest rate of 18% and paying $20 a month towards the debt, you will pay over $18,400, more than TWICE the original debt, just in interest. Did you really need to make those purchases?
What if you have more than one card, like most Americans do? What if your debt is over $7200? What can you do? How can you get out of this 29 year marriage to debt?
There are some ways that can help you pay off your debt and do not require expensive loans, invasive credit repair and score checks, or expensive financial planners and consultant. You can also save on interest charges by paying off your debts in order of largest interest rate first.
The most effective technique is to pay off one debt and apply that payment amount to the next debt. This way the amount you pay on a your credit card debt increases.
For example, you have three credit cards with debts of $5000, $4000, and $3000 which are charging you 18%, 27%, and 12%, respectively, and you are paying $150, $125 and $100 each month. By paying these required monthly amounts you will pay off your $3000 credit card first assuming you are not continually adding more debt.
Now that the $3000 card is paid off you have an extra $100 a month. Put that extra $100 toward paying off your next credit card debt. Now you are paying $225 a month on the $4000 card and the $150 on the $5000 card. With this accelerated payment on the $4000 card you will pay off the card earlier and save some money on interest charges.
Then apply the $225 payment to the $5000 card for a monthly payment total of $375. Soon this card will be paid off and you will have $375 extra each month to pay off other debts like a mortgage or car note.
So, which debts should get paid off first?
Generally, you want to pay off the debts that are charging you the highest interest rates first. In the above example you could have added the $100 payment to the $5000 credit card rather than the $4000 credit card. But the $4000 credit card is charging you 27% where the $5000 credit card is charging 18%. By paying off the card charging the higher interest rate first, you will save some money on interest charges.
************************************************************ © Simple Joe, Inc. David Berky is president of Simple Joe, Inc. which sells the Simple Joe's Debt Eraser PC software. Debt Eraser can help anyone get out of debt quickly and inexpensively by creating a Rapid Debt Reduction Plan.
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