Ten Ways to Reduce Your Credit Card Debt

Reducing credit card debt is on the minds of many Americans these days. Many people are even choosing to pay down their credit card debt before paying their mortgage payment each month so they have extra credit available to them if they need it in the future. According to Equifax, one of the three main credit reporting bureaus, credit card debt has dropped by nearly eight percent in the last year alone. If you have been thinking about paying down your credit card debt, here are some steps to keep in mind.

1. Figure out how much you actually owe. The best way to start reducing your credit card debt is to make a list of the bills you owe. Gather all of your bills together and make a list of the debts you owe from smallest to largest. Make a summary sheet which lists the monthly payments, name of each creditor, overall balance, interest rates, credit limits and account numbers. This way you have all the information you need for the future payments right at your fingertips. Also, make a note about any past due payments, payment dates and so forth.

2. Be determined. Paying down your debt is not going to be easy. You did not get into debt overnight and you are not going to get out of debt overnight. In fact, it will most likely take you longer to get out of debt than it took to get into debt. Be determined to make it happen and do not get discouraged and give up or else you will always be in debt.

3. Prioritize. The first bills you should pay each month are the ones necessary to keep you healthy. This includes shelter, groceries, transportation and basic utilities. After that should come your secure loans, such as car payments. Credit cards and other unsecured debt should be last on the list for any money you have left over at the end of each month.

4. Talk to your creditors. Many people who are in debt absolutely hate talking to the people to whom they owe money. However, a simple phone call to your credit card company could result in lower interest rates and possible even waiving some late fees and penalties. The lower your rates and the more fees you get waived means that you have more money to put towards your debt. Also, if you think you may miss a payment, call your creditors beforehand to let them know. They are more willing to work with you if you tell them you may miss a payment rather than waiting until afterwards.

5. Pay more than the minimum. Minimum payments are a disaster for people trying to pay down their debt. These payments are usually between two and five percent of the overall balance and it could take several years to pay off your debt if you just do this. Of course, within that several years you are also accruing interest and more debt so it is like an endless cycle. Instead, double or triple your minimum payment whenever possible and just watch that debt melt away!

6. Work diligently on the smallest debt on your list. Many financial experts will tell you to put all of your efforts into paying off the largest debt or the one with the highest interest rate first. However, according to Dave Ramsey, paying off the smallest debt first gives you an emotional high that gets you excited and motivated to pay down the next debt. Work on the smallest debt first and then once that is paid off, apply the money from that debt to the second one. You might be paying a little bit extra in the long run, but you will be more motivated as you see debts get paid off one by one.

7. Transfer your balances. If you have a credit card with a lower interest rate than the others, consider transferring your balances to that card. This will decrease your overall costs in the long run. However, be sure to read the fine print carefully so your interest rate does not increase as soon as you transfer your balances. Some cards may even have a transfer fee so make sure you know what you are getting into when you transfer a balance.

8. Get in the habit of using cash. Studies show that consumers spend an average of 12 percent more on food and other stuff when using their credit cards instead of cash. When you use cash, there is an emotional experience as you watch your cash pass from one hand to another. As a result, you are more likely to be conscientious about the money you spend.

9. Pay on time. Late payments not only cost you extra money in penalties, they also damage your credit score and cause you to have higher interest rates on future loans and credit. Depending on your credit score, you could actually lose up to 110 points if you have a payment that is more than 30 days late.

10. Analyze your credit report regularly. Make sure you check your credit report every six months or so to see if your payments are getting reported accurately. Credit card companies may still be reporting delinquencies and other negative information if you do not stay on top of it. It is your job to ensure your credit report has accurate information so take the time to analyze it twice a year so you know you are getting the best possible rates available to you.