How to Lower Your Credit Debt

Eight Ways to Reduce Debt on Your Credit Cards

Jul 20, 2009 Mario Carini

Credit cards have their uses. Unfortunately, the downside of easy money promotes free spending until many find themselves in a credit trap from which they cannot get of

The free spending ways of yesterday have come to a halt under the harsh reality of today's economy. Many have been caught off guard, unable to cope with the mountain of debts on their credit cards. Restoring a balance between income and debt becomes a necessary evil if the standard of life is to be maintained.

With today's interest rate still holding at high levels and not in sync with economic reality, it's necessary to take steps to reduce debt, particularly credit cards.

Debt Consolidation

The first step to reducing credit card debt is knowing how much is owed and how much is being paid out every month. That requires writing down the figures of all bills as well as all income sources.

Creating a Budget

Next comes creating a budget that factors in the cost of all necessities, fixed and variable. Once insurance, taxes, utilities, food, clothing and other items are accounted for and deducted from income, what's left over must be used for paying down those cards.

Cut Up the Credit Cards

Throwing out the cards means survival on cash alone. It enforces discipline and fiscal responsibility. The temptation will always be there and it will be painful to skip those specials. But the consolation is that debt will be reduced in the fastest period of time. Go the debit card route. Purchase items only when there is enough money in the bank to buy them.

Finding Ways to Save

Most families can save up to 20% on their food budget simply by avoiding impulse buying, using coupons, buying bulk, buying specials, buying at dollar stores or even growing their own vegetables. Switching off lights and turning down the thermostat helps save on the energy bill. Shopping for better homeowner and car insurance rates can save a good deal of money. Eating out less often and renting videos instead of watching new movies at the theater impact family finances for the better. Contacting the credit card providers to see if interest rates can be lowered can save a good deal in interest payments. If they refuse, consider moving the whole balance to one that offers a lower rate.

Emergency Funds

It's still necessary to save something for a rainy day. While the priority should be on reducing debt, emergencies do happen. If not anticipated, they can prompt the use of credit cards. Car repairs, medical bills, loss of employment are all realities in today's economy, so having an emergency fund to care of those expenses help while debt is steadily reduced.

Spending Reduction

Many families own two cars, but can often get by with one. Living close to work can provide much needed exercise by walking or taking a bike. Public transportation is often a cheaper alternative to paying for insurance and maintenance costs for the second car. A smaller home often suits family needs better. Appliances and furniture can be made to last. If something is needed, buying at liquidation sales or buying used will save a great deal of money.

Job Performance

Few people ever consider making themselves valuable to their employer. A raise in pay can help reduce existing debt. But the extra money should be tempered as it not the opportunity to celebrate. Taking a second job or part-time work may be necessary.

Creating Cash Flow

Everyone has a lot of junk they don't need but languishes in the basement, attic and garage. A garage sale can get rid of those unwanted items and bring in the needed cash to pay those cards off.

Whatever money that is freed up or earned should go directly to paying down debt. It should be the first priority. It takes time before a zero balance is achieved, but the effort put into reducing debt will teach discipline and the value of money. Those qualities, once learned, will translate into more wealth and a happier and better future.

The copyright of the article How to Lower Your Credit Debt in Personal Budgeting/Finance is owned by Mario Carini. Permission to republish How to Lower Your Credit Debt in print or online must be granted by the author in writing.

Cash is Still Your Best Friend

What do you think about this article?