What is a Credit Card Debt?
A credit card debt is an unsecured loan debt given by a creditor to card holders, usually in form of advance to purchase for items using the credit cards. This financial liability through credit cards can be owed to one bank or more with different terms, condition, interest rates and limits of borrowing.
Credit card borrowings have higher interest rates than many other form of loan. Severe penalties are also issued to those who delay their payments.
Why do I Need a Credit Card Debt?
Are you in a fix with no cash to buy some item urgently? Or have done your shopping but the money you carried to the counter is not enough? Then Credit card debts are useful for customers under such situations. With the credit card you will have deferred payment over a given relaxed period of time. The good news is that there are credit card debt relief provisions for monthly payment so as to save on interest that comes with long time payment.
Benefits of Credit Cards Debts
Using credit cards to make purchases come with some benefits to the card holder. Here are some of those benefits:
· They offer revolving credit limits to the users. Payments for these revolving credits are often low.
· The card holder has the option of paying off balances in an instance instead of paying in installments with interest.
· Most credit card companies have the provision of reward incentives to users. The reward can be in the form of a gift or points which can be used for future purchase or for paying off outstanding balances
Easy Steps towards Paying off Your Credit Card Debts
Credit card debts can be very overwhelming and can drain you financially really fast because the interests build up fast. The more you continue using your credit card the more the debts piles up. Often times, people ignore their credit card debts, delay the payments till some point where they can no longer handle the debts.
Lucky enough there are ways in which can make the whole process of paying-off your credit card debt manageable. Here are some steps that can help you start you journey towards financial freedom by paying off your credit-card debt more conveniently;
1. Figure Out Exactly What You Owe
Make a list of everything you owe. Have all your receipts and bank statements to help with clear records and exact figures. On your list, arrange the credit cards in order according to the outstanding balance on each. Write down the interest rates against each card, minimum monthly payments and the payment period, this will help you in calculating the amount you ought to channel towards paying off every loan.
2. Arrange the Credit Cards by Interest Rates
After knowing the exact value owed by each card, rank them in order starting with the debt with the highest interest rate at the top and the one with the lowest interest rate at the bottom. Start by settling the credit card debt with the highest interest rate. When you do your calculations, the high interest rate cards turn out to be the most expensive at the end.
3. Pay your Minimum Monthly Payments diligently
In as much as you are settling the credit card debts with highest interest rates first, don’t forget to pay all the minimum monthly payments for all your credit cards. This is necessary so that you avoid penalties and to prevent your debt for spreading over a long period of time.
4. Increase Minimum Monthly Payments
Set a goal of paying more than the minimum amount every month. To achieve this, take a look of your budget. Look at the extra cash you have left and channel it towards paying for the minimum monthly charges. If you double your minimum monthly payments for your credit card loan debts, you half the payment period. This is the quickest way towards your financial freedom.
5. Change Your Habits and Spending Patterns
Your bad spendthrift habit is one of the reasons why you have a huge debt in your credit card. You are spending more than you are earning! Start by studying your everyday expenditure, see the habits and expenses you can forego every day.Skip a few drinks every week with your drinking buddies. At the end of the week. You will realize you have saved a lot. Channel these cash towards paying off your credit card debts. Downsize temporarily till you complete all your payments.
6. Consider selling Some of Your Assets
If your plans to pay off your debts don’t work out as you expected, you may consider selling one or two of your assets to pay off your credit card debt. When the interest rates on your credit cards are too high and it seems like they are going to drain you financially, cash your assets. It is advisable to start investing immediately after paying off your debts to compensate for the sold assets.
7. Credit Card Debt Consolidation
Credit card Debt consolidation involves consolidating all your credit card debts into one with low interest rate, payable in a single monthly installment. This process is advised because it is cheaper in the end and you won’t have to file for bankruptcy. It is also a good option because it will lower your monthly payments, and reduce the period of loan payment.
8. Renegotiate terms with Your Creditors
If all your strategies to settle your credit card debts are not working out in your favor, you may turn to your creditors and appeal for better terms. Explain your situation to them, ask them to reduce your minimum monthly payments, reduce your interest rates or both. They really don’t want to suffer a total loss when you default on your loan so they may give you better terms or put you on an extended payment plan.
9. Freeze Your Credit Cards for a While
You need to settle your credit card debts before you take more credit card debts. By freezing your credit cards, you will stop impulse buying. Freezing the credit cards means you will be strictly using cash for purchases and that will help you save a lot because you will think wisely before you spend.
After settling your credit card debts, start planning appropriately. Pay your credit card balances on time to avoid getting into debts.