Reducing Credit Card Debt

In this time of national and personal economic uncertainty, reducing credit card debt has increasingly been on the minds of everyone. Considering the average credit card debt numbers in the United States, it comes as no surprise. So when it comes to reducing credit card debt, particularly your own, what can you do?

The first topic that needs to be discussed related to reducing credit card debt is addressing the spending habits that got you there to begin with. A sound understanding of how credit cards work and how they are to be used is critical to avoiding and reducing credit card debt. Credit cards should not be treated as payday loans or cash advances. This is the mindset that gets people into situations where they are looking into reducing credit card debt. A credit card should be treated as a debit card by following this simple rule: If you do not have cash in an account somewhere to cover the purchase you are considering, do not pay for it with a credit card. Plain and simple. Do not fall into the mindset of "well I'll pay for it with my credit card now and cover it with next month's paycheck". That is the type of thinking that will lead you to sites about reducing credit card debt, as you probably know.

Another critical aspect to reducing your credit card debt is to make a personal budget. This can be done on the computer or on paper, but needs to be done to get on the path toward reducing credit card debt. Without getting into excessive detail in this discussion, simply list all of your expenses (from rent/mortgage to magazine subscriptions to weekly coffee expenditures) and all of your income. Look at ways to reduce or eliminate all of the costs you have listed. If you are serious about reducing credit card debt, you will need to (at least temporarily) stop or heavily cut back on shopping for new clothes or dvds, eating out, etc.

Before looking into financial products aimed at reducing credit card debt, such as a credit card debt consolidation loan, you need to correct your spending habits so as not to go further into debt as discussed above. Next, you will want to look at reducing the amount of interest you pay on your credit card debt. This can be done via interest rate negotiation with your credit card company, as well as by consolidating your debt to the card that provides the lowest interest rate (you may even want to open a new card for this purpose). Lowering interest paid is vital to reducing your credit card debt. We will discuss strategies for doing this as well as other advanced strategies for reducing credit card debt in future posts.