Credit card debt reduction needs careful planning

It is not always easy to carry out credit card debt reduction because the tendency is to swipe a credit card than pay hard cash. That is why credit card debts have a nasty habit of snowballing. They also come with high interest rates, and need to be checked when they first start accumulating.

The most obvious strategy to reduce credit card debt is to reduce spending on your credit card. This prevents the monthly balances from growing. It is even better to get rid of all your cards, but one. This card can be retained for use during emergencies. However, you must make sure that this card has a low credit limit, and the lowest interest rate in the market.

A second way is to avail the 0% balance transfers that credit card companies offer from time to time. This offer is made to lure credit card customers, especially those who have accumulated large debts. The advantage is that you avoid paying interest on your debts till the offer period lasts. This is surely useful saving because your repayments go towards clearing your principal debt.

You should consider this as an ongoing activity till your principal amount is cleared. This means that you should have your new credit card application ready a few weeks before your current offer period runs out. If you cannot transfer the balance then pay off as much as you can afford, so the balance reduces as quickly as possible. Even if you don’t get a 0% offer, find out the interest rates being charged by other card companies and transfer your balance to the company that is charging the lowest interest rate. The goal should be to reduce interest charges till the entire principal amount is cleared.

You can also opt for an automatic payment system whereby your bank ensures that the credit card payments or a part of them are made every month from your account. This will help keep your credit card debts low.

Debt consolidation loan is another option you can undertake. These loans offer two advantages. The first is that they come at a much lower rate of interest as compared to credit card debts; the second is that you make a single payment per month to the agency that has provided the loan instead of several payments to your credit card creditors. You can therefore keep better track of repayment, and also avoid unnecessary harassment at the hands of several creditors.

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