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Credit Cards Out of Control? 3 Ways to Get You Back on Your Feet

Would you believe a purchase of $1000, with an interest rate of 18%, could put you in debt for the rest of your life?

Around 72% of consumers have at least one credit card. In 2016, the average household with credit card debt carried more than $16,000 on those cards. If these statistics sound all too familiar to you and you’re afraid your credit card debt is starting to become overwhelming, it’s time to get your debt back under control.

1. Concentrate On Paying Down Debt Fast

Interest on your credit cards adds up fast. An initial purchase of $1000, with an interest rate of 18%, could take years to pay off, assuming that you make only the minimum payments each month. In fact, if you make even a few late payments the penalties could result in NEVER paying it off, as you’ll see in a moment.

The problem results in the minimum set by the credit card company. Often they will set the minimum just a few dollars above the interest rate. At 18% interest that $1000 purchase will cost you $180 per year in interest or about $15/month. So the Credit card company might set your minimum payment at $20/month. You assume that paying $20/month would take 50 months to pay off (1000/20=50). But only $5 is going toward principle so instead of 50 months (4.16 years) it will take 94 months to pay it off (that is almost 8 years!!!). But if you make a single late payment, the credit card company will charge you a late fee of $25 or even $50 thus wiping out 5 or even 10 monthly principal payments!  At that rate 2 late payments a year and you will NEVER get out of debt! Talk about Debt Slavery. Do you still think the credit card company is being nice by setting such a low minimum payment for you?

In the calculator below, simply change the amount to $1000, the interest rate to 18% and the monthly payment to $20 and see what happens to your total interest! Then enter your actual amounts.

In a “best case” scenario, you’re adding an extra $516 of interest to that payment–over half of the principal amount. In order to get out from under that devastating umbrella, you have to break the cycle of the minimum payment–and that means dedicating your resources to paying off your credit card debt as fast as possible.

2. Get Creative About Paying off that Debt

Find ways to pay more toward your debt. Hold garage sales. Get a part-time job. Make getting out of debt your #1 priority. Get creative. When people put their minds to it they have eliminated all debt (other than their mortgage) in 3 years. Once their credit card debt is eliminated, by putting that money toward their mortgage, many have gone on to eliminate their mortgage in 7 years.

3. Preventing Credit Card Use

You want to stop using your credit cards and adding more debt to your account. You’ve even tried hard to do it. Unfortunately, “necessary” purchases keep showing up. There’s that weekend away with your friends that you simply couldn’t fund on the notice they gave you, that meal out when your budget was already stretched too thin for the week, or that splurge purchase you just had to have–and they’re all piled onto your credit card. If the temptation gets to be too much, consider a few creative tactics for decreasing your credit card spending.

Freeze your credit cards–literally. That way, you have to wait for them to thaw out before you can make a major purchase. Or better yet cut them up and call the credit card company and tell them you want your account closed (but that you will continue to make payments). That way, if you have your credit card number memorized and are prone to online shopping, order new cards so that you won’t be tempted to just enter the numbers.

Reevaluate your budget. Make sure that you’ve leaving a little room for splurges or special purchases so that you’re less tempted to “cheat.”

3. Consult a Financial Adviser

There are times when your efforts simply are no longer enough to get you out of debt and give you the financial freedom you need. Whether you’re ready to consider filing for bankruptcy or simply need more help getting your affairs in order, consulting with a financial adviser, like Price James S & Associates, will help you make the best decision for you.

Financial freedom isn’t impossible. By following these methods, you can get out from under the weight of credit card debt and find the financial freedom you’ve always wanted. It’s not about slashing your spending; instead, it’s about living within your means now so that you can be free from debt before you know it.