subject: Credit Card Debt Reduction - Basics Never Change [print this page] I came across a magazine from the 1990's recently. After paging through the funky clothing, ratted hair, and recipes swimming in fat, I found myself reading an article about how to get out from under credit card debt. Curious to see if the debt relief world has changed in the last decade or so, I read on. Back in the 1990's when credit was king, there would have to be different strategies for reducing personal credit, or at least, different attitudes, right?
It may be hard to believe, but the methods used for getting your card debt under control hasn't changed very much at all since 1992. Surprised? The economy has changed, so why hasn't getting out of debt significantly changed, too?
The basic principles of financial freedom don't change over time. Live within your means and put some money aside each month. Throughout the last 10 to 15 years we have become a credit card dependent people, using credit cards for ordinary, everyday items.
I suspect that in 1992 an article about debt relief didn't get as much attention as the clothing and hairstyle articles. But, today, more and more people are seeking sound advice on methods to manage their own freedom from credit card debt.
So, what are the basic strategies for a family like yours to get rid of their credit card debt for once and for all? Briefly outlined, here are the steps you need to follow to get on the right track. Amazingly, these 6 steps are just as true today as they were back in 1992:
1) Destroy Your Credit Cards - This may hurt a little if you're used to having a never-ending supply of credit, but it's critical. Get rid of those department store cards first, than when you get to your Visa, Master Card, or American Express, stop. Check out the terms of your major credit cards and determine which one you should keep for emergencies. You'll want to be able to make reservations, use the kiosk at the airport, etc., so you'll need one major credit card. Cut the rest of the cards up now.
2) Crunch The Numbers - Now it's time to do a family budget if you haven't already done one. Without spending a lot of time on detail, simply take your net income each month, subtract the expenses that must be paid every month such as mortgage, rent, heat, lights, food, and clothing. What's left is your disposable income; what you have to work with to pay off the credit card debt. This is information that you must have on hand in order to move on to the next step.
3) Be Brave and Call the Card Companies - This step is considered by many people to be the most difficult, but it is also the most crucial. You won't get very far making minimum payments as late fees and high interest keep piling up. Get the last statements together and call the credit card company customer service department. Tell them you are going to pay off your balance but it is only possible if the late fees are dropped and the interest is lowered. Credit card companies are looking for every payment they can squeeze out of you, so be ready to negotiate and don't be intimidated. You are talking to credit card company employees doing their job, and you are doing yours.
4) Get Ready to Sacrifice - Isn't it great when you get a tax refund or a bonus? This extra money can sure be fun to spend. However, you no longer have that luxury, at least, not yet. You have some serious debt to pay off before you can relax and enjoy your money. Every cent you have that isn't otherwise needed for household bills must be applied to your credit card debt if you want your plan to work. If you don't believe me, take a look at what you are still paying in interest even after you've gotten a lower interest rate. Do you really want the credit cards to get your money just on interest charged? Your money has greater value when used to reduce the interest on your credit cards.
5) Commit to Your Plan - Paying off your credit card debt this way doesn't offer any instant gratification. It could take a year or more to see any real benefits. The commercials may tell you that you can be debt free in six months, but that is simply not true. It took you some amount of years to get into debt, it will take you some time to dig your way out. You may see some progress toward your debt-free future in about six months or so, but beware of celebrating too soon. You may feel like treating yourself to an expensive reward, but resist the urge. Just add up all the interest you've been paying over the last six months you'll see that the credit card companies are still enjoying way too much of your money. Skip the splurges and stick to your plan so you'll once again enjoy your own money.
6) Approach Debt Consultants Carefully - A never ending barrage of commercials promising fast debt relief has been added in recent years to the business of credit. There are legitimate companies that do handle debt consolidation and financial planning, but you have to check them out carefully. If a debt consultant offers you a quick and easy fix to your credit woes, they are not to be trusted. There are no easy ways out from under a pile of credit card debt. If you consider using a debt consultant, interview them in person and ask pointed questions about how much of your money goes directly to the credit card debt. If you are certain you want to pursue a debt consultant, do so only after checking them out with the Better Business Bureau. Also, ask for recommendations from trusted friends. Get all the information up front before you decide.
When it comes to debt, times really haven't changed. Your parents and grandparents were right about how to handle money; don't spend too much and put some away every month. Credit has been too soft and too available for much too long. Now, many of us find ourselves in a very difficult position. We can't enjoy our lives if we are drowning in debt and unable to break free. These simple steps have worked for people through the years and can work for you, but only if you follow through all the way to the end...the end of your credit card debt. Then you can breathe deep and relax; finally free to enjoy your own money.
