Credit card debt is such a serious problem in America that millions of consumers stumble blindly from month-to-month wondering if they’ll ever find a way out.
According to the Federal Reserve, revolving credit-card debt hit $1.023-trillion at the start of 2018, breaking the record set a decade earlier, when the housing and credit bubbles burst to create the Great Recession.
The Consumer Financial Protection Bureau said American households carrying a credit-card balance owe an average of $16,048.
Meanwhile, people keep applying for new cards — at a rate of 50% growth since 2010.
Those numbers are shocking, sobering, intimidating and a good reason to find simple, practical ways to reduce credit card debt.
You don’t need to be flogged by government statistics. You need answers.
What can you gain by eliminating credit-card debt?
Here’s a quick checklist of the positives:
- Your credit score will improve (vitally important for home and car purchases)
- You will have more money for spending and saving, particularly for your retirement
- You will reduce the stress in your marriage or relationships
- You will gain a better appreciation for what you are spending and possibly eliminate needless purchases.
The benefits are obvious, so let’s have a look at 14 of the best ways to reduce your credit-card debt:
1. Pay Your Bills on Time
The Golden Rule of credit card ownership: Make on-time payments every single month! Preferably on-time payments that reduce the balance to zero every month.
Nothing impacts your credit score or your financial health more positively than making consistent monthly payments on all accounts. If you skip a payment or are consistently late, it’s a red flag. Don’t let it happen.
Even if you can’t settle the entire balance, you MUST pay your credit card bills on time. That allows you to build a nice credit history, while positioning yourself for lower interest rates in the future. If you miss the payment deadlines, you’ll be saddled with late fees, which will run up the debt and hurt your credit score.
2. Live Within Your Means
If we’re being honest, this is the real reason why many of us slip into deep credit card debt in the first place. We purchase things we can’t afford. Many times, we’re buying things we don’t need. The eagerness to “Keep up with the Joneses” never goes out of style in America, but it continues to create needless financial issues.
If you spend less than you make, you will create the ability to save. And if there’s an unexpected expense — they happen to everyone — it will be more of an inconvenience than a crisis.
3. Pay off Higher-Interest Cards First
This is a math equation that should be easily understood.
If you have two credit cards — one with an interest rate of 18% and one with an interest rate of 24% — you should always, always, always pay down first on the card with the 24% interest rate.
Some people think that paying the same amount to each one is the “fair” way to do things, but it is mathematically a huge loss for you, the consumer.
By paying off the card with 24% interest, you are making 6% on your money, as long as you pay at least the minimum on the 18% interest card.