If you seriously want to cut your credit card debt for good, you are going to need to first learn how to take control of your finances. This requires identifying the mistakes that you’ve made in the past that led you to get yourself into debt and then putting new rules into place that will help you break these old bad habits. After that, you will need to take a good look at your finances to see which strategy (or strategies) will work best for you, so you can cut your credit card debt for good.
The first and most obvious place to start is with your credit card spending habits because they are most likely the root cause of your problems. Want to grab a quick café latte’ and scone on your way to work but don’t have any cash on you? Put it on the credit card. Think you can’t live without that new purse or golf shirt that you saw on sale at the mall? Put it on the credit card. Or how about a few drinks with your co-workers after work even though you’re not carrying any cash? Hey, there’s no problem there either because you can always put the tab on your credit card too.
The next thing you know, it’s the end of the month, and your credit card bill arrives. You open it up to find that you’ve spent a whopping $1,200, but you only have a fraction of that available in your budget to apply towards your bill. Normally, a situation like this would have you very worried, but guess what? There apparently isn’t a problem because the minimum payment is even less than what you had budgeted. So you figure, what the heck, you only really have to pay a hundred dollars or so, and you’ll catch up on your credit debt the following month when you think you’ll have some extra money. Unfortunately, this pattern repeats itself again and again, and by the end of the year, you’ve mounted up over ten thousand dollars worth of debt. That “minimum payment” that was once very manageable isn’t so manageable anymore at over $300. In fact, just paying it puts you well over your monthly budget for your credit card expenses. And what’s worse is that $300 “minimum payment” you now can just barely afford isn’t even making the slightest dent in that ten thousand dollar credit card balance you managed to rack up.
Unfortunately, credit cards are all too easy to use. When you are buying things with plastic instead of real money, it makes it much more difficult to discipline yourself and to stay on budget. The low minimum monthly payments only compound the problem because they let you slide a little deeper into debt each month without ever having to fully account for your poor spending habits.
This is not to say though that there aren’t other reasons why people who normally would have excellent spending habits might still get into credit card debt. Maybe you lost your job and had to survive on your credit cards for a few months until you got a new one. Or perhaps you had a medical emergency that wasn’t fully covered by insurance and you had to put a good portion of your medical bills on your credit cards. In any case, you are still going to have to repay that money.
Whatever the reason, if you truly want to cut your credit card debt for good, the very first thing you have to do is to take control of your spending habits. If you tend to spend compulsively, this is going to be more difficult for you than it is for someone who got into credit card debt from an unexpected financial necessity.
If you are a compulsive credit card user, you must cut up your credit cards so you won’t be compelled to use them. You will, however, want to keep one card (with the greatest remaining balance) just in case there’s an unexpected emergency. While it is commonly recommended that you do something silly with this one remaining card like freezing it in a block of ice, it is probably a much better idea to give it to a trusted friend or family member for safekeeping with the sworn promise that they will only return it to you in the event of a real financial emergency.
Now that you have cut up your cards, you are probably wondering if you should also close the accounts. This is not a good idea because your creditors will probably be far more willing to work with you if you’re an active customer, as opposed to a former one holding a closed account. For them, it is good business to keep your business, so hopefully keeping your accounts open will make them more willing to work with you (more on this later).
Furthermore, keeping your accounts open will also help improve your overall credit score. Just keep in mind though that you should probably never carry balances on more than two credit card accounts at a time for the most optimal score. Likewise, you should always try to avoid ever carrying a balance that is more than 50% of an account’s credit limit.
Now that you have hopefully taken control of your credit card spending habits, the next step will be to take a good look at your personal finances. With this you will then know what resources you have at your disposal to pay off those high balances and to cut your credit card debt for good.