Credit Card Debt
August 23, 2011 | Alliant Credit Union
The average household has approximately $15,000 worth of credit card debt and an average annual percentage rating (APR) of 13.44% on credit cards with a balance.1 Paying down credit card debt can be difficult if you're only making the minimum monthly payment due to the high interest rates, but there is a light at the end of the credit card debt tunnel.
If you follow a few basic steps and stick to a plan, you should be able to pay your debt off sooner - paying less in interest and improving your credit score. One way to pay off your debt is paying more than the minimum monthly payments, so here are steps to start paying down your credit card debt:
- Create a workbook in Excel and title the columns:
- Credit Card Name
- Outstanding Balance
- Interest Rate
- Minimum Payment
- List out all of the information for your credit cards in the correct column, but order the list based on interest rate with the credit card with the highest interest rate being at the top and the lowest at the bottom.
- Total the minimum payments column. This is the absolute lowest monthly payment that you can pay going forward.
- Review your budget, or create a budget, and figure how much extra you can allocate each month in addition to the total for the minimum payments to put towards paying down your credit cards. Every little bit helps so don't worry if you don't have a lot.
- When you pay bills next month, pay the minimum on each card except for the credit card with the highest interest rate (at the top of the list). This is the card that's costing you the most money carrying a balance, so apply the extra cash you found to this card in addition to the minimum payment.
- Repeat until the highest interest rate card it paid off.
- The following month apply the amount you were paying on the card you just paid off to the next credit card on the list in addition to the minimum payment you've been paying.
- Repeat steps 1 - 7 until you pay off all of your credit cards.
Here are a few things to consider and help you pay down your credit card debt sooner:
- Avoid using your credit cards.
- Call your credit card companies and inquire about getting your rates lowered. It may not work, but it doesn't hurt to try.
- Look into transferring balances on higher interest rate credit cards to lower interest rate credit cards.
- Review your spending habits and eliminate where you can to put that savings towards your monthly payments. You could start bringing your lunch to work or stay in one night a weekend to save money.
- Don't get frustrated and give up. It'll take time, so be patient.
- Use your credit cards only if you the cash to pay the balance at the end of the month.
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1 Yahoo! Finance
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