The average American credit card debt per household is near $6,000.00. Since this is an average isn’t doesn’t truly show how many people actually owe more than $10,000.00. With the staggering numbers continuing to climb it can make even a family with a good credit score start to lose ground. Did you also know that credit card companies have the right to raise your interest rates to stay in line with the Federal Reserve rates? This means that you could open your next bill and see a payment due for double or even triple the amount you previously paid. The good news is that there are ways to reduce your debt and reduce your interest.
Transferring the balance to an interest-free card
If you have several credit cards with high balances and you are not able to pay the bill off in a single month, you may want to consider transferring the balance to a new card that offers an introductory period interest-free. Companies like Credit Soup do the work for you. They have a wide range of credit cards that offer various perks for each situation. By transferring a credit card with a high interest rate and a high balance to a card with no interest for 6 to 12 months you can save a few hundred dollars or even a thousand or more. At the very least you can find a card that offers a reduced rate of interest versus the rate you are currently paying.
Reducing your credit card debt
While transferring the balance to an interest-free card, buys you some valuable time, it does not solve the problem. That being, the amount of debt you owe is still there. It will allow you to pay off more than you would with interest but you still have the monthly payments on your budget. Ultimately what you want to do is really reduce your credit card dependency. If you currently use them for everyday purchases and you don’t pay off the bill when it arrives, you’re spending your hard-earned money on nothing. Instead, comprise a budget to pay off your cards one by one, starting with the one that has the highest interest rate. If you have more than five or six cards, consider closing a few out. Not only will it free up your available credit and remove temptations, but it will actually raise your credit score. Having too much revolving credit at your disposal lowers your credit score, even though you make your payments on time.
Pulling in your belt
If you are relying on credit cards for daily purchases, chances are also good that you don’t have the money in the bank to pay for these items out of pocket. This is a bad situation. One unexpected illness or the loss of a job can send your budget into complete turmoil. It’s important to lower your debt now instead of later. You can free up money each month by making a few small sacrifices that in the long run will pay big dividends. For one, if you eat out more than a few times a month, try eating home nightly and enjoying one dinner out for the month. The same goes for your morning cup of coffee. Makes it at home and put it in a travel mug. Just these two items alone will save you a modest $200.00 to $300.00 per month. There are many more places you can save as well including buying generic brands, clipping coupons for groceries, hair care, and household items, walking instead of driving and losing the personal trainer for a while.
Importance of a budget
Ultimately, the solution to reducing your monthly debt is establishing and sticking to your budget. A budget is there to protect you and get you through each month. If you derail you’re only hurting yourself. Reducing the amount you owe out each month by paying down your outstanding debt is a sure way to enjoy more of your cash in the near future.