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 If you are looking to eliminate credit card debt you are not alone. Americans carry just an enormous amount of debt. In 2007, consumer debt is expected to reach an estimated 2.5 trillion dollars according to the Federal Reserve. That is nearly a 25% increase over the last five years. And credit card debt alone accounts for over $914 million dollars.
Growing Use of Credit Cards
The Federal Reserve has also found that the average household with debt carries around $22,000 in revolving debt and has nine credit cards. So if you are looking to eliminate credit card debt, you are probably looking at big numbers, just like everyone else.
The growing debt problem has a lot to do with the credit process itself. Credit card statements are pretty good at showing you how much you've charged over the past month or so and their marketing departments are pretty good at finding new credit card offers you simply cannot refuse. The problem is the credit card company doesn't give you a clue as to how to eliminate all that credit card debt you've accumulated.
Credit Card Minimum Payments
In the past, legislation has been proposed that would require credit card companies to provide consumers with the monthly payment required to eliminate their debt in just 36 months. And there have been some recent adjustments to the calculations of the required minimum payments on credit cards.
But there's a lot at stake here for credit card companies and to continue to fuel the growth of that industry they have to strike a delicate balance between acquiring more credit card holders and taking on bad debt. Besides, individuals that find themselves in real credit card trouble might be needlessly frightened when showing them how to pay off $22,000 in just 36 months. So how do you go about starting to eliminate all that debt?
Three Simple Ways to Eliminate Credit Card Debt
In the past, we've outlined five basic methods that we feel are appropriate for debt elimination (in general). These methods include budgeting, debt negotiation, credit counseling, debt consolidation and even bankruptcy.
We're going to make the assumption that you are not too far down the road that it is too late to turn back and so we will briefly discuss three relatively easy ways that you can eliminate credit card debt - budgeting, credit counseling and debt consolidation. If you're looking for something a little more aggressive, you might want to look at our article on debt elimination.
Fighting Debt with Budgets
If you find yourself with a lot of credit card debt and it looks like you're going to have difficulty paying off your debts, then you might want to consider creating a household budget.
Everyone with mounting debt problems is faced with the same simple financial conditions - outflows of money are exceeding inflows. You might just be living beyond your means for some reason or a source of income has been suddenly cut off.
If you are disciplined, you should first try to establish a realistic budget for yourself. MSN Money is offered for free for those of you on the MSN system. Quicken is reasonably priced and has a budget function as part of that software. Finally, you can always use a budget spreadsheet to figure out how much money is coming in and how much is going out.
Examining Credit Card Statements
If your credit card is part of the problem, you might want to look several of your past monthly statements and to figure out exactly how you are spending your money. Is it on discretionary expenses such as entertainment or eating out in restaurants? Or are most of your charges related to mandatory expenses, which are essential to everyday life?
The first thing you need to do is create categories for all your expenses and sources of income. Then take a hard look at each expense and figure out which ones are mandatory and which ones are discretionary. Make sure the inflow or income is greater than your expenses or outflows.
You probably don't need to deny yourself too much, just manage the expenses a little better. But when monthly expenses exceed income it's time to cut back on some of those discretionary expenses. But what happens if you're having trouble making ends meet and you don't seem to spend a lot of money on discretionary expenses? In this case, it might be worth seeking the help of a professional.
Credit Counseling
If you don't know where to get started with a budget, or you're having trouble making your budget "work" then you might want to consider contacting a credit counseling organization. Many reputable credit counselors work for not-for-profit service organizations that are well equipped to work with you to solve your financial problems. Take a close look at our article on Christian Debt Counseling to get a better idea of how that entire process works.
In general, you can expect your credit counselor to help you with both social issues that might have resulted in excess credit card debt as well as developing a customized debt management plan that allows you to meet your monthly financial obligations and helps you get back on your feet.
Debt Consolidation
As a final step, debt consolidation can often be a very fast and effective way of eliminating credit card debt by moving all of those individual "loans" and putting them together in one place. Just keep in mind that debt consolidation loans will require collateral and your home, car or some other valuable asset will be at risk.
Debt consolidation loans provide you with income tax advantages over some of the other options you have but because your home is on the line, you need to make sure you make your monthly payments on time.
Debt and Credit Card Calculators
If you're interested in evaluating some "what if" scenarios with respect to credit card debt or other money owed lenders, we've introduced several online calculators aimed at helping you with those calculations including:
- Credit Card Payment Calculator - our credit card payment calculator helps you to figure out your minimum monthly payments based on your outstanding credit card balance and the APR on your credit card.
- Credit Card Payoff Calculator - our credit card payoff calculator allows you to determine exactly how much you need to pay each month to pay off your existing credit card debt.
- Debt Reduction Calculator - our debt reduction calculator is another debt tool that helps you to build a plan to reduce your debt.
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