4 Ways to Reduce Your Credit Card Debt

We Americans have a lot of revolving debt, about 850 billion dollars worth of it. Most of that is credit card debt, and more than a bit of it is overdue. If you are contributing to that ugly pile of overdue debt, it is time to work on getting yourself out from under that ugly pile. Excess debt can damage your ability to save, invest, and achieve the things you really want in the future.

Here are a few tips to helping get out of the hole:

  1. Fix the cash flow. If you can’t get yourself to a positive cash flow your situation will just continue to deteriorate. Simply put, you can’t spend more than you bring home (for very long) without problems. Usually the spending side is easier to reduce than the income side is to increase, so get a handle on your spending.
  2. Paying off debt is a type of investing. Prioritize paying down debt within a reasonable time frame over saving and investing. Work on savings after you have a handle on cash flow that includes paying off debt. As an example, say you have a credit card balance of $8,000 with a 14% interest rate. Given current market performance, paying off the card before investing is a no-brainer. But even if the stock market was experiencing an annual gain between 8% and 9%, paying off debt would still be your better bet.
  3. Negotiate with your credit card companies. Just call them up and ask for a better rate. It can’t hurt. More than half of people who request a reduction receive one. A drop of seven to ten percent will sure help in the quest to eliminate debt.
  4. Consolidate at a lower rate if you can. Not only does it make it easier to keep on top of the payment a lower rate means you can pay down principle that much faster. A few extra hundred dollars paid against principle is sure a nice way to speed up the process.

Even if it takes a few years paying off, that debt will be an important step in securing your future.

About the author

Jim Heitman, CFP®

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