Erase Credit Card Debt
Crushing Credit Card Debt
by David Berky
How much do YOU owe on your credit cards?
The average American family is now over $7000 in debt just on their
credit cards. That debt generates an interest charge of over $105 each month if
your card charges the average 18%. If you have missed a payment or made a late
payment (even by one day!), you may be paying up to 27% interest or over $157
each month.
Most credit card companies require a modest payment towards the card
balance. Modest meaning from $10 to $20 a month. To pay off a $7000 debt at $20
a month you will not pay off this debt for 29 years.
And what about those interest charges? Paying off a $7000 credit card
debt charging an interest rate of 18% and paying $20 a month towards the debt,
you will pay over $18,400, more than TWICE the original debt, just in interest.
What if you have more than one card? What if your debt is over $7000?
What can you do? How can you get out of this hole? There are some techniques
that can help you pay off your debt and do not require expensive loans,
invasive credit checks, or expensive financial planners and accountants.
You can also save on interest charges by paying off your debts in a
certain order. The most effective technique is sometimes called the "snowball"
method. The snowball method suggests that when you pay off one debt you apply
that payment amount to the next debt. Thus the amount you pay on a debt grows
like a snowball rolling down a hill.
For example, you have three credit cards with debts of $5000, $4000,
and $3000 which are charging you 18%, 27%, and 12%, respectively, and you are
paying $150, $125 and $100 each month. By paying these required monthly amounts
you will pay off your $3000 credit card first. Now that the $3000 card is paid
off you have an extra $100 a month.
Put that extra $100 toward paying off your next credit card debt. Now
you are paying $225 a month on the $4000 card and the $150 on the $5000 card.
With this accelerated payment on the $4000 card you will pay off the card
earlier and save some money on interest charges.
Then apply the $225 payment to the $5000 card for a monthly payment
total of $375. Soon this card will be paid off and you will have $375 extra
each month to pay off other debts or better yet, INVEST!
So, which debts should get paid off first? Generally, you want to pay
off the debts that are charging you the highest interest rates first. In the
above example you could have added the $100 payment to the $5000 credit card
rather than the $4000 credit card. But the $4000 credit card is charging you
27% where the $5000 credit card is charging 18%. By paying off the card
charging the higher interest rate first, you will save some money on interest
charges.
If this sounds too confusing, you can enlist your computer. You can
search the Internet for the keywords "debt reduction calculator" or you can
visit http://www.simplejoe.com/debteraser/default.htm and review a product
named Simple Joe's Debt Eraser.
Simple Joe's Debt Eraser helps you create a Rapid Debt Reduction Plan
that is customized to your debts and your situation. Just enter your debts and
the amount you can afford to pay each month. The software will create a plan
telling you how much to pay towards each debt each month until they are all
paid off.
You CAN pay off your debts. The trick is to stop charging purchases
to your credit cards and develop a debt reduction plan. Your plan should
include "snowballing" your payments and prioritizing the debts by high interest
rate.
David Berky is president of Simple Joe, Inc. which sells the Simple
Joe's Debt Eraser PC software. Debt Eraser can help anyone get out of debt
quickly and inexpensively by creating a Rapid Debt Reduction Plan. Visit
http://www.simplejoe.com/debteraser
for more information.
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