Credit Card Debt – Falling, but Still High
As of 2008, Americans owed about one trillion dollars in credit card debt. This is an amount equal to the annual GDP of Mexico. Since then, the number has gone down. But, with an aggregate debt of over $856 billion, Americans still owe a lot. The average household credit card debt is around $15,000.
This sort of debt can create a nearly impassible barrier between you and home ownership dreams and other goals. With $15,000 in credit card debt at 18% interest, just paying the minimums will eat up $375 a month of a couple’s budget. And, if you are only paying the minimum, you’ll be paying that credit card debt for over 31 years; that’s longer than most mortgages.
Getting rid of high interest credit card debt is one of the best things you can do to take control of your finances and get on the path toward new opportunities. Once credit card interest is no longer eating up significant portions of your income, that money can go toward vacation funds, retirement savings, a down payment on a home or whatever else you wish.
Struggling with credit card payments? To reduce your credit card debt load:
- Use the snowball method. Start by making the largest payment toward the credit card that has the highest interest rate. As each card is paid off, use the amount that used to go to it to max out payments on the next bill.
- Augment it with snow flake payments. In this method, every little extra bit of cash is put toward debt. Ten dollar rebate? Put it toward your credit card bill! Found a twenty in your pocket? To the bill!
- See if consolidation makes sense. If you have high interest rates on your credit cards, you may be able to get a lower rate by consolidating the loans. Just make sure that any fees will not offset potential benefits.
- Leave your cards at home. The most important factor in getting rid of credit card debt is making sure that you do not accumulate more. Leave your credit cards at home and take cash if you feel like having them might be too much temptation. Also, make a point of saving up in advance for big expenses like a vacation or a new laptop instead of charging them and figuring out how to pay for them later.
It takes time, effort and discipline to pay down credit card debt. But, the boost to your credit score, the extra cash that you no longer spend on interest and the removal of that financial stress is worth it.