21st Century Credit Card Reduction Strategies – Has Anything Really Changed?
Posted on March 25, 2011 by Patti Winker
I found myself paging through a magazine in the doctor’s office recently and quickly realizing that I was looking at a magazine more than a decade old. This was evidenced by the large hair, odd fashions, and recipes without a drop of olive oil. As I enjoyed the trip through time, I saw an article on credit card debt relief. Considering the credit climate today versus the credit climate of the 1990′s, I assumed the methods and theories of debt reduction would be different. At least, that was what I was expecting to read.
Surprisingly, basic credit card reduction principles haven’t changed very much since 1992. You might think that during times of loose credit that debt reduction would be different than in times of tight credit. However, it appears my assumptions were mistaken.
The basic principles of financial freedom don’t change over time. Live within your means and put some money aside each month. Throughout the last 10 to 15 years we have become a credit card dependent people, using credit cards for ordinary, everyday items.
I suspect that in 1992 an article about debt relief didn’t get as much attention as the clothing and hairstyle articles. But, today, more and more people are seeking sound advice on methods to manage their own freedom from credit card debt.
If you are serious about getting that credit card debt under control, there are a few standard steps to follow. The steps outlined here are very similar to the steps outlined in the article from 1992, and will help you get back on the road to financial recovery:
1) Cut Up Your Credit Cards – Painful as this may be, it’s a crucial first step. Start by cutting up in-store credit cards and work your way up to your major credit cards, then stop. You want to keep one major credit card, meaning a Visa, Master Card, American Express, and the like, for the purpose of booking flights, hotel rooms, and for emergencies. Review your remaining major credit cards, determine which has the lowest interest rate, with no annual fee, and keep that one card. Now, cut up the remaining cards.
2) Figure Out Your Financial Bottom Line – Time to look at the money you have coming into your household. You need to develop a basic budget before you go on. Take what’s spent on household necessities each month, like housing, food, clothing, heat, and so forth. Subtract that from your monthly take-home pay. You have now figured out what you have left to send your creditors. You need to have this information before you go any further, so, sit down now with paper and pencil and figure out your disposable income.
3) Take a Deep Breath and Call Your Creditors – This is the step that is the most unnerving, but it’s necessary if you want to achieve your goal of credit card freedom. Gather the last month’s statements from all your credit cards. Call the customer service number and tell the credit card company employee that you want to pay off your debt, but cannot afford to make the monthly payments as they are currently set. Ask for lower interest rate and reversal of late fees. Credit card companies are negotiating, but you need to be firm.
4) Time For Sacrifice – We all love it when we get our income tax refund, or a bonus at work, or what we call “found money.” I hate to be a wet blanket here but, every extra penny you have must be used to pay down your debt if you expect your plan to work. Anytime you “find” money, think about how many times that money is “lost” again when you pay interest on an unpaid credit card balance. You’ll get a faster return on that found money when you use it to pay down a debt.
5) Stick With Your Plan – It may take a year or more to see real gains with your plan. No matter what the commercials say, you can NOT significantly pay down your credit card debt in six months if you have a substantial debt. Consider how much time it took to accumulate the debt and realize you won’t be able to erase it in the same amount of time. However, with determination, after about six months you should start to see some relief. When you see those balances start dropping finally, don’t get restless and start splurging again. If you need a reminder of what just one splurge could cost you, go back and add up all the interest you paid on your credit card. That information should keep you on the straight and narrow.
6) Very Carefully Check Into Debt Consultants – Something that has changed since the 1990′s is the use of credit card debt consultants. Countless debt relief companies are vying for your business, offering to take you quickly and painlessly out of your debt struggle. Debt consultants must be considered and investigated very carefully as they often end up costing you more than if you set up a payment plan directly with your creditors. Interview any debt consultant you may want to hire in person. When you discuss your debt with them, did you feel you were being listened to and you got answers to the questions you asked, or did they just tell you everything was going to be “fine.” Be sure you know all the details including their percentage taken from your payment, any other fees involved. Talk with people you know and trust, as well as the Better Business Bureau. You could be worse off with a debt consultant than without one, so do your homework.
When it comes to debt, times really haven’t changed. Your parents and grandparents were right about how to handle money; don’t spend too much and put some away every month. Credit has been too soft and too available for much too long. Now, many of us find ourselves in a very difficult position. We can’t enjoy our lives if we are drowning in debt and unable to break free. These simple steps have worked for people through the years and can work for you, but only if you follow through all the way to the end…the end of your credit card debt. Then you can breathe deep and relax; finally free to enjoy your own money.
Nicole Dean is the mostly-sane mom and owner of ShowMomtheMoney.com – a resource dedicated to helping moms achieve success working from home. She invites you to learn more ways to save money in her Frugal Moms section. Be sure to sign up for her free lessons for work at home moms.