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Tips For Shredding Debt

Credit cards make spending money incredibly convenient, but that convenience comes with some problems. A quick swipe or a click of the "buy now" button online is effortless, and losing track of your spending is just as effortless. You can find yourself in a compromised situation quickly, and it can be demoralizing. Young Americans are racking up credit card debt at a record rate, and many of them are struggling to pay the debts back.[1] If this has happened to you, you are not alone. Far from it, actually.

If you're reading this article, you've probably had enough of this stressful situation, and have decided to do something about it! You should congratulate yourself and know that there is hope. This effort will be no walk in the park, but you can do it. Think of how good it is going to feel when you beat this debt! All you need is to keep moving in the right direction.

Here's a list of simple strategies that can help you break the debt trap.

Organize Your Finances
It's time to put those spreadsheet skills to use. Making a detailed list of your plastic, along with the interest rate and debt carried by each one, is a great way to get a top-down view of the whole situation. Getting a look at your total debt might be a shocker, but you can't deal with a problem if you don't know what it is! Look at the numbers objectively, and make your game plan from what you see.

Create a Budget
We're still working with those spreadsheet skills. Create a budget that details all your spending. Review it carefully and look for any areas where you might be able to save some money. This extra cash can help you pay off your debts faster. Whether it's cutting out some restaurant meals or canceling your weekly subscription to a few gossip magazines, do it!

Start with One Card
If you have multiple accounts, don't try to tackle them all at once. Take a breath and focus your energy on the biggest issue first. That's the card with the highest interest rate.

Targeting the card with the lowest balance first is also a legitimate strategy. You will not only clear an entire account quickly, but it will also give you a feeling of accomplishment. If your goal is to pay off a single account in the quickest time possible, this option is the right one for you. The catch is that the card with the highest interest rate is going to continue eating up your money, which makes it a target that you will want to address sooner rather than later. Targeting the highest interest rate first is the fastest way to eliminate debt. Why? Well, think of how much you can reduce your monthly bills if you pay off that piece of plastic, and the interest is no longer mounting up month after month. The money saved is yours! You can then invest that extra cash towards paying off the account with the next highest interest rate. Each time you pay off one of these cards, you give yourself extra cash each month, which eventually snowballs into a nice chunk of money. Keep repeating this process until you're completely free of credit card debt. When you reach that stage, the extra money is yours!

Point to note--you need to keep paying the minimums on all other cards while you're targeting an individual one. Don't forget!

Ask for a Lower Interest Rate
Sounds like a no-brainer, but most of us wouldn't think of it. Try calling each of your card providers and request a lower interest rate. It's a bold move, but if it works, you'll get lower monthly payments. Again, this tactic continues to snowball your cash and gives you more debt-clearing power.

Here's an extra tip--If another company has offered you a card with a lower interest rate, be sure to mention that to the customer service rep. That might be just enough leverage to convince them to lower your rate, rather than lose your business.

Double Your Minimum Monthly Payments
If it fits sensibly into your budget (because you'll take the advice and create one, right?), making two minimum payments each month can cut into your debt like nothing else. You see, you have what's called an "average daily balance," which affects your interest rate. Every time you make a payment, you reduce the average daily balance and your interest charges at the same time, allowing you to pay off the debt much faster.

Use Cash
This drastic step can be a tricky one, as many of us have auto-pay set up for bills on our cards, but the quickest way to eliminate any credit card debt is to stop using the card! If you can pay cash for an item, do it. You'll automatically spend less since your cash doesn't come with an interest rate, and with cash, you can only spend money you have. It's a good way to kill any impulse-shopping habits.

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