Thread: How to Effectively Pay Off Credit Card Debt

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Making only the minimum payment on a credit card has been a way for many to pretend that nothing is wrong in their financial lives. In July 2010, the federal government required credit card issuers to make their customers take the blinders off by requiring them to outline exactly how long it will take to pay off the balance if only the monthly minimum is paid. Here are some suggestions for effective ways to pay down credit card debt.

It is a given that paying only the smallest allowable payment each month is not the way to go. Minimum payments generally account for less than three percent of the total balance due. Instead of limping along paying more and more interest, look closely at the card's interest rates. Find one that has not reached its limit and use it for transferring balances from higher interest cards. It makes no sense to be paying interest that is close to 20 percent when there are plenty of cards that are closer to 12 or 15 percent.

Snowballing is a term that used to describe a way to get a handle on credit card debt. In this method, the card holder pays the minimum on all accounts except for one. That account selected to be the first, is to be paid off in full and any available extra funds are devoted to getting this done as quickly as possible. The snowball part comes as one account is paid in full and the rest follow suit. The key is using the extra money towards paying off the next debt, not buying other items.

Another option for decreasing card debt is to empty out savings accounts. This seems contrary to the way most have been raised financially. Savings accounts have been paying incredibly low interest rates for years while credit card rates have soared. While cashing out a savings account is a big step, earning two or three percent interest versus getting rid of a debt at 17 percent means more money long-term.

In the same vein, some life insurance policies have cash values. It is possible to borrow against these types of insurance accounts. In one way, it is loaning yourself money, yet the rate of interest is nearly always lower than from other lenders. Another benefit is that repaying the borrowed amount can be spread out over a long period of time.

These methods are all ways to effectively reduce or eliminate credit card debt. There are also a number of organizations and businesses that can provide helpful resources in debt management. Getting out from under card debts is not quick or easy, but it can be accomplished by sticking to a sensible plan.

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