How To Reduce Credit Card Debt | Ways To Reduce Debt

Article by Tanya Calaban

How To Reduce Credit Card Debt ? Finance ? Credit

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When you try to figure out how to reduce credit card debt, you will have to wade through several different solutions all claiming instant, hassle free debt elimination. It isn?t as rosy a picture as they paint, but it is possible to achieve a significant reduction.

As you look through your options, it is important to remember that what will work best for your situation may not be the same thing that works another. Each individual has to choose a plan that is consistent with your long term goals, credit card balances, and time requirements for success.

Regardless of which method of debt reduction you choose to use, you must start with the same step.

Step 1 ? Stop Making Purchases With Your Card

Before doing anything else, you must stop using your credit cards. This can be difficult for many people. However, you must cut up your cards and stop using them to avoid sabotaging your reduction efforts.

If you are still using your cards every month, it may not even mean that you are overspending. You may be struggling so much that you cannot afford the minimum monthly payments. You can get locked in a cycle that includes paying your credit card bills, and then, using the available balance to buy groceries or other necessities.

Even though this spending is not frivolous, it will keep you in debt.

?Step 2 ? Reduce Your Monthly Payments

If this describes your situation, you need to find a way to reduce your monthly payments. This will buy you breathing room to maneuver financially

If you are having trouble figuring out where you can create room in your finances consider CCCS (Consumer Credit Counseling Services) help. These non-profit professionals work with you to set a budget and having a neutral unemotional assessment of your finances always helps.

A CCCS can take over the management of your finances, negotiate with your lenders and setup a payment structure for you until you get back on your feet. Then, you send CCCS a payment every month which they divide and send to your various creditors.

The advantages of this sort of program is that someone else takes care of your finances for you so you do not have to worry about making payments on time or any other hassles.

The downside, however, is that many creditors especially collection agencies may refuse to work with your CCCS specialist. Additionally, we HIGHLY RECOMMEND taking responsibility for your finances, as proper management of your money is a skill, one that is learned. Ceding responsibility to your CCCS advisor can help you develop better habits, but does not develop your money management skills.

Another way to reduce your monthly payments is by taking out a consolidation loan. These loans provide you with enough money to pay off your current debts, can reduce what you owe to the credit cards and pay them off entirely. Consolidation loans restructure your debts into a cheaper loan for you to pay off, instantly saving you money.

Step 3 ? Restructure Your Debt

Consolidation Options

A consolidation loan supplies you with one loan and one monthly payment. The advantages of consolidation loans are that they have lower interest rates than most credit cards, and they are structured as installment loans. That means that you know exactly how much money you need to pay each month, and you know exactly when you will be debt free.

The downside of these loans is that they do not always require you to close your credit cards. Thus, it can be tempting to get into debt again and the empty credit lines are very tempting to use especially after a long period of financial hardship.

Debt Consolidation vs. Debt Settlement

You may also have heard about credit card debt settlement companies. These companies help you to get a reduction on what you owe to your credit cards by negotiating to get your debts forgiven. A settlement is when the bank agrees to cancel the debt for a payment that is less than you currently owe rather than your walking away from it completely.

However, most credit card companies will only offer settlements to people who are behind on their bills. Very behind on your bills. If you are in long term default, a settlement company can help you figure out a budget and negotiate on your behalf.

You will typically be asked to send the settlement firm you are working with a set amount of money each month which they will place into a savings account. As you are saving money, your creditors are not receiving their monthly payments. After several months, they will then negotiate for you to get a portion of your debts forgiven in exchange for a lump sum.

Advantages

The advantage of working with a settlement program is that you may get out of debt faster than you would if you were using other methods.

Disadvantages

The disadvantage is that it has severe consequences for your credit scores that will last with you for many years affecting your ability to find credit.

However, if your bills are only small, the fees and interest that accrue while you are not paying them may negate the positive effects of the settlement savings. The months of delinquencies look bad on your credit report and you should only choose this strategy as an alternative to bankruptcy.

Settlement is especially useful for people who are not worried about their credit score. It is also important to remember that if you save more than 9, you will have to report that savings as income to the IRS.

For instance, if you settle a ,000 bill for ,000, at the end of the year, that bank will send you a 1099 form saying that you ?earned? ,000. You will have to declare this on your income tax form, and it may increase your tax burden or decrease the amount of your tax return.

Step 4 ? Increase Credit Card Payments

When you are learning?how to reduce credit card debt, you will notice a few things.

First of all, it is very important to reduce your interest rates.

Secondly, it is very important to stop using your cards.

Lastly, you must find as much money as possible to devote to your debts each month. When you do these three things, you start your journey to becoming debt free and with time and effort you will get there.

The exact method that you choose will depend upon your personal preferences size of your credit card balances and time requirements for reducing your credit card debt. The key is to take action today.

About the Author

If you?re serious about ?reducing your credit card debt and borrow as much money as you need when you need it. If you are sick of being declined for a loan when you need it most? then you found the right person. I?ll make borrowing money easy and enjoyable for you? AND NOT BORING!

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Second, look around my website as there are a number of other resources to help, including industry leading offers, credit rating tips and advice as well as do-it-yourself action plans if you prefer just to know how.

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Use and distribution of this article is subject to our Publisher Guidelines
whereby the original author?s information and copyright must be included.

Tanya Calaban

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If you?re serious about ?reducing your credit card debt and borrow as much money as you need when you need it. If you are sick of being declined for a loan when you need it most? then you found the right person. I?ll make borrowing money easy and enjoyable for you? AND NOT BORING!

First, click how to eliminate credit card debt?to get the powerful help you need to deal with money problems now. This will get you the immediate proactive help you need now.

Second, look around my website as there are a number of other resources to help, including industry leading offers, credit rating tips and advice as well as do-it-yourself action plans if you prefer just to know how.

Third, with my advice you can stop bill collectors harassing you financially, eliminate your uncertainty, and get yourself back to the confidence in knowing you have the money you need, while gaining access to as much money as you want. You?ve heard it all before? I get it. But we?ve helped save MILLIONS already, and know all the ?tricks? in the book to help you get the most that you can.

Fourth, there is no fourth. Simply enjoy the how to eliminate credit card debt?resources we compiled for your benefit, take action, and use the money for whatever you wish! If you don?t find a solution to your right now problem? I?d be amazingly surprised!

Use and distribution of this article is subject to our Publisher Guidelines
whereby the original author?s information and copyright must be included.

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