Pay Off Credit Cards - Which Credit Cards do I need to Pay Off First?
There are good reasons to pay off credit cards. First and foremost, by paying outstanding balances in full each month, you will be able to retain your credit status. In today's tumultuous economy, credit is going to be much harder to obtain. Consumers who pay the minimum amount will likely see their credit line diminish. Others may have their account closed altogether.
Another good reason to pay off credit cards is to eliminate monthly payments and high interest rates. Experts state that Americans carry an average of $20,000 in credit card debts. By paying only the minimum due, consumers could pay interest for as long as 20 years. Is that morning latte and fast food lunch really worth being in debt for two decades?
Unfortunately, many people use their credit cards to pay for everything. They do not stop to think what the expenditures are actually costing them or how long it will take to repay their debts. We live in a plastic society and are encouraged to spend, spend, spend. However, times are changing and instead of living outside our means, we are going to be forced into a frugal lifestyle.
Being frugal isn't such a bad thing. In fact, it is the only way to get out of debt and become financially free. Those who choose to eliminate frivolous spending now will reap rewards when the economy turns around.
The first step to pay off credit cards is to stop using them. While this may seem unfathomable to some, you really can survive without your plastic. If you are unable to make ends meet financially without using your credit cards, now would be a good time to create a budget or engage in credit counseling.
Financial experts such as Dave Ramsey, suggest cutting up your credit cards. Others suggest placing them in a bank safe deposit box as you go through the process of paying off credit card balances. If you must use your credit cards, it is imperative to create a plan to pay the entire balance each month.
When developing a plan to attack credit card debt, start by paying off cards with the highest interest rate, regardless of the balance. Next, pay off cards with the highest balance due. For people who want instant gratification, consider paying off cards with the lowest balance after paying off the high interest cards.
It is important to create a debt relief plan which is realistic and can be adhered to. Eliminating debt is similar to losing weight. While you wouldn't expect to lose 20 pounds in a week, you can't shed all your credit card debt over night. It took time to create this financial mess and it will take time to trim the financial fat. If you attempt to take it all on at once, chances are you will fail. So, make a plan you can live with and stick to it until you reach your financial goals.
If you find yourself having trouble creating a plan to pay off credit cards and other outstanding debts, consider obtaining credit counseling. Credit counselors are trained in helping individuals gain a better understanding of their spending habits. They can review your finances and help you determine the best strategy to get out of debt. In some cases, credit counselors can help you negotiate with credit card companies to reduce interest rates, eliminate late fees and reduce outstanding balances.
Other options to pay off credit cards include debt consolidation and debt settlement. Debt consolidation is generally reserved for homeowners who possess equity in their real estate. Debt settlement can be a good option for consumers who owe $100,000 or more. Both options carry risks which should be carefully considered.
Published on October 09, 2008 at 09:39 PM
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