How to Deal with Mounting Credit Card Debts
The debt problem, while it seems to be a personal issue, is actually shared by many. In America alone, there is a revolving outstanding debt of $683 billion – this is the monthly unpaid debt that’s subject to interest. Of the people who owe, most pay only the minimum required. Only 13% can afford to pay even just half of what they owe. And while this is a fact, debt continues to mount.
It is time we take on this problem that can (and will) cost us a lot in the future.
The “pay now” option
While we seem to be such suckers for the convenience of credit cards, these cards are actually burying us in finance charges and interests. A couch bought today and used for just five years is typically paid for only after thirty years. This is the same for a vacation suite you only used for a weekend, and dinner you ate up in a night. Compounding interests build up our debt until we end up maxing out our credit line.
Before this happens, it is important for you to consider the pay now option. While credit cards offer the convenience of cashless transactions and the pay later option, paying now may be the more practical choice. Think about it – why postpone paying for a $20 meal now when you’ll have to pay $100 in compounding interests if you put it on your card?
Steps to controlling mounting debt
There are things we can do in order to control our debt and spending. Here’s a quick rundown of the steps:
1. List down what you owe. An honest assessment of your financial standing is necessary to fully grasp the extent of your debt problem and what you need to do. Organize your bills according to balance size and minimum monthly payment requirements.
2. Make priorities. At this stage, your goal is to be able to pay off all your debts at the soonest possible time. When making priorities, note down debts with small balances. These are the items that can be easily paid off. When you get extra funds, use some of these to pay off all your small debts, while making the minimum payment required for your bigger debts.
3. Throw away some cards. Once you’ve paid off one or two of your credit card debts, get rid of them. The last thing you need is more temptation to overspend.
4. Make a payment and spending plan. You will still need to put food on the table, buy gas, and pay for all the other daily necessities. However, you probably don’t need a new television set or sofa set. Focus on payments at this time and stay away from unnecessary expenditures.
Photo Credit : Andres Rueda
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