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How To Eliminate Credit Card Debt Quickly
Credit card debt is the most cunning adversary to
securing your financial future. Unfortunately, many college students
obtain credit cards while still in school. Credit card companies
use enticing promotions to lure consumers by increasing credit limits
and offering pre-approval. All of these strategies attempt to install
the habit of spending now and paying later.
Many people don't realize how destructive this habit
is, until their credit card payments become the largest part of
their monthly budget. Credit card debt, as a percentage of income,
has been on the rise for the past two decades. It may be difficult
to break the habit of using credit cards; however, the reward is
worth the effort. A debt-reduction strategy called
The Debt Reduction Pyramid will enable you to completely
pay off your credit card balances. The Debt Reduction Pyramid is
designed to help you pay off your balances quickly and painlessly.
This strategy is the same as if you tear down a pyramid. If you
did this, where would you start? The most logical place is the tip,
since the foundation is so enormous. You would begin at the top,
removing one brick at a time until the entire pyramid is torn down.
Thus, you will pay off your balances, one payment at a time. There
are four simple steps to follow. These steps include:
STEP ONE The first step of this strategy involves
writing down all outstanding credit card balances in ascending order
(smallest to largest). This is referred to as the Debt Pyramid.
STEP TWO The second step of the strategy is
to concentrate on completely paying off the lowest balance. By paying
off the lowest credit card balance, the top of the debt pyramid
is eliminated. In addition to the minimum monthly requirement, you
should pay as much as possible over and above the minimum. For example,
if the minimum monthly payment is $40 on the smallest balance, a
check could be written for $75. ($40 minimum required plus an additional
$35) Pay this extra amount every month until the entire balance
of the first card is paid off.
STEP THREE Once the lowest card is completely
paid off, concentrate on the second position. After the credit card
balance at the tip of the pyramid is paid off, add the minimum monthly
payment of the first card to the minimum monthly payment of the
second smallest credit card. For example, if the minimum payment
on the first position was $40 and the payment for the second card
is $55, then your monthly payment to the second credit card would
be $95 ($40 +$55 = $95). The benefit of using this step is that
the minimum payments are already allocated into your budget. Thus,
no additional money is reallocated to pay off outstanding debt.
STEP FOUR Continue using this strategy until
all credit cards are completely paid off.
IDEAS FOR HOW TO STOP USING CREDIT CARDS
Once you begin conquering your credit card balances,
the worst thing to do is to begin using them again. Here are four
ideas to follow to stop using plastic:
- Lock Up or Cut Up Any Credit Cards
One of the best ways to stop using credit cards is to not carry
them. However, everyone should have access to at least one card
in case of an emergency. There may be times when a large amount
of money is needed immediately. For example, to purchase an airline
ticket in a family emergency or rent a car. An innovative way
to remind yourself of this is tape a piece a paper on each card
with the words: "FOR EMERGENCY USE ONLY".
- Write Checks
Get in the habit of writing checks: This offers two advantages:
The first benefit is you can't make a purchase unless the money
is in the account. This may eliminate frivolous spending. The
other advantage is it will wean you out of the credit card habit.
- Use Debit Cards
A debit card is similar to a credit card with one distinct difference.
Whenever you make a purchase, money is subtracted from your account.
You cannot spend more than what is in your account.
- Put a Reward System in Place
Every time a credit card is paid off; treat yourself to a long
walk on the beach or a dinner out, but not a shopping spree to
put you in more debt.
By following the Debt Reduction Pyramid Strategy,
anyone can take control of and completely eliminate credit card
debt.
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