Debt in life is necessary. as with everything in life moderation is key.
Credit Card debt is the type of debt you should NEVER have.
The interest it charges are usually sky high, it becomes a snowball of debt if left unpaid and will affect your credit score which then becomes a big deal as a trickle down effect.
Getting rid of credit card debt repayment is like taking off a bandaid, it surely hurts but it needs to be done fast.
Step 1
The first step before you even attempt to tackle credit card debt is not to get more in debt. If you cannot afford it now what makes you think you can afford it at the end of the month when the bill is due.
Before you buy something ask yourself - Do I want it? or Do I need it? If it is the first one you can skip buying it.
Step 2
If you have multiple credit cards you need to first organize them from higher to lower interest rates. After you have done this you can then proceed to clear the highest interest rate first.
***Please do not stop paying the other credit cards, on the very least make the minimum payment due every month so your credit score does not suffer***
Step 3
Sacrifice !!
The next step is to focus, save and pay aggressively down the balance of the credit cards.
There is no easy way around Step 3, no magic potion or silver bullet. The options out there to help you pay credit card debt are at times worst than the Debt itself.
I will discuss options to pay your credit card (aside from paying it upfront) briefly and in a very simple and easy way to understand why they are not good for you.
1- Debt consolidation - Pretty much you get a loan to pay off the credit card, depending on credit score etc you may get better interest rate. You get one monthly payment which I guess makes it easier.
2- Retirement account loan "401k Loan" - you get a loan backed by your retirement account. Guess what will happen if you stop paying? You end up without retirement.
3- Balance transfer credit cards - This is a very tricky option as often these offers will have similar interest rates, you are just moving your debt around.
4- Home equity line of credit - Here you offer your house as collateral. Guess what happens if you stop paying? You lose your house...
5- Debt settlement company - These companies will settle the debt for you, then proceed to collect it from you for a fee. What happens if you stop paying? They will take anything you own.
Thefinancialmd.com your prescription for a healthier financial life.
Till next time.
JL
Disclaimer - This blog is meant purely for educational discussion of finance. It contains only general information about financial matters. It is not financial advice, should not be treated as such. This is not medical advice, for medical advice please talk to your medical provider.