The Credit Camp

The average family is buried under an overwhelming amount of credit card debt. While the minimum monthly payments may be affordable, at 18-28% interest it is like running on a perpetual treadmill. It is extremely difficult to crawl out from underneath this, once you find yourself trapped in the cycle. However there are ways to fight back and beat credit card debt.

The first thing you need to do is draw up a plan of the most efficient and cost effective way to pay down your credit card debt. This will ensure that you pay off the accounts in a specific order, thus saving you the most in interest charges.

You should begin by determining how much you can afford to pay towards your credit card debt each month. The assumes there is anything available to allocate beyond the minimum payment. If you can only afford the minimum payment or can not even afford that then we will discuss some other alternatives a little later on.

Once you have established your monthly credit card payment budget then you can set up a schedule where you are will make only the minimum payments on the cards with the lowest interest and throw the remaining amount against the most expensive card. This will result in the card that costs you the most to carry a credit card balance to get paid off first.

Once this first and most costly card is paid off, you then take the amount that you had been paying monthly towards it and divert it to the account with the next highest interest rate. The may or may not be the account with the highest balance owing. That doesn’t matter. What matters is getting the high interest rate accounts paid down as quickly as possible.

You then continue to repeat this process until you have retired all the accounts.

What if you flat out can’t afford the minimum monthly payments?

Credit card debt consolidation

Consolidating you credit card balances means taking out one new larger term loan and using the proceeds to pay out your credit card balances. This loan is then amortized over a specific period of time and instead of having to satisfy several lenders who each want a monthly payment, you will just have to make one payment. This single payment is often lower than the sum of all the individual payments which frees up monthly cash flow so that you are not forced to rely on your revolving credit to make ends meet. Additionally as the loan is not revolving, you will not be able to re-advance on it as you pay it down, so you will truly be getting ahead by reducing your overall borrowings.

Debt Settlement and Debt Workout

Two terms that essentially mean the same thing: coming to an agreement with your credit card company to accept a payout in an amount that it is lower than the total amount outstanding. A lender will consider this proposal if they truly believe that you are likely to declare bankruptcy. In most cases if you declare bankruptcy they will get nothing, so it is in their best interest to accept a reduced payout and at least collect a portion of the loan.

If misery loves company you can rest assured you are by no means alone in your struggle to beat credit card debt. There are many options available to you once you make the commitment to do something about it. You need to be realistic about your circumstances and resolve to make a change for the better. The rest will fall into place on its own.

Credit card debt relief is the ultimate goal for an individual that finds him or herself in over their head. This is not simply about getting rid of outstanding balances, but also getting rid of the tremendous amount of stress that goes along with carrying them. It is about having money left over from your paycheck for yourself and not working forty hours a week to pay VISA or MasterCard. So many times we hear the echo of “If only I had a better job I could get out from under these high balances, and pay down my credit card debt faster.” Reflief from this is about getting yourself in a better place both financially and psychologically.

It is a fine line between the temporary high that comes with the instant gratification of making a large purchase and charging it to our credit card. But it is just that: temporary. The novelty of the new toy wears off and we are left with the stress that comes with seeing the balance on our statement take an even greater leap higher. A simple lifestyle change where we don’t give in to the temptation of making that purchase can help to bring about credit card debt relief.

I hesitate to flat out recommend creating a budget. The stress that comes with trying to follow a rigid spending budget can rival that of the credit card debt to begin with. But without question you need to set limits for yourself.

Sometimes simply starting over is the best course of action. If your circumstance allows it you may want to consider an interest only home equity line of credit or home equity loan. This will allow you to tap into the equity that you have built up in your home and use it to bring credit card debt relief. Many folks hesitate to remortgage for this purpose, but it is important that you realize that you already owe this money. You are not borrowing against your home for another frivolous purchase, you are simply acknowledging that if you are going to be paying interest on these funds you may as well pay the lowest interest rate possible.

There are many debt counselling services that can be found online or in the yellow pages. Please use caution with these companies and understand what they are offering and what you are signing on for. The fact is that the services these companies offer can often be carried out by the individual. The difference when deciding what to do comes back to stress and simplifying your life. If your situation has gotten that bad, it might just be worth it to hand over all of the “leg work” to a company that won’t feel the same pressure you would feel when contact your creditors to seek credit card debt relief.