Most people know that one of the hardest things to do is to reduce credit card debt. With that said, this debt is incredibly easy to fall into—which creates a never-ending loop as you try to get out. Considering that the average American household has at least $15,000 in credit card debt, options to reduce credit card debt are abundantly available. These debt relief options may come in forms such as debt management, debt settlement, debt consolidation, credit counseling, bankruptcy, et cetera.
Each option to reduce credit card debt has its own set of advantages and disadvantages depending on your financial circumstances. To determine which option is best for you and your situation, it would be best to hire the help of a debt consultant. These financial experts are able to negotiate with your creditors or collectors on your behalf and provide you with counseling services to assist you in the process of becoming debt-free.
Debt relief services do not necessarily require payment. If you are unable to afford the added expense of a debt consultant service fee, there are several organizations who may offer simple credit counseling for free. If you’re in need of debt relief assistance, keep reading to learn more about how you can reduce credit card debt.
How You Can Effectively Reduce Credit Card Debt
With that said, you may also be able to reduce credit card debt on your own, without the beneficial help of a professional debt consultant. The best way you can do this is to simple make monthly payments that are higher than your minimum payment requirements.
Many people don’t realize that the minimum payment requirements typically only cover approximately 5% or less of your total outstanding balance. The rest of the money is applied to high interest rates and other charges. By only making the minimum payments each month, you’ll end up taking years just to minimally reduce credit card debt.
In 2006, the Office of the Comptroller of the Currency required that all credit card companies increase their minimum payment requirements in an attempt to force debtors to pay more of their outstanding balances each month. This increased the coverage from 2% to 4%.
To put this percentage into perspective, imagine that you have an outstanding balance of $10,000 and an interest rate of 18%. A minimum monthly payment of $200 would only cover 2% of your balance, and it would take you approximately 50 years to pay off the complete amount—forcing you to have paid more than $28,000 in interest.
On the other hand, making minimum monthly payments of $400 would cover 4% of your balance, and it would then take you only 13 years to pay it off—reducing your overall paid interest to just under $6,000. By increasing your monthly payments to $500, you could pay off all of your debt in two years and only pay approximately $2,000 in interest overall.
Clearly, increasing your monthly payments by only a couple of hundred dollars could save you a lot of stress, time, and money in the long run. In fact, you could decrease your overall payment period by almost 50 years! By sticking to the lowest minimum payments, you’ll end up paying more than double what you originally owed, and all that’s only if you never used your credit card again while you worked to pay it off.
In the end, $100 or so can be pretty easy to save each month and put aside to increase your monthly payments. The long-term benefits definitely outweigh whatever you have to cut out of your budget right now.
If you would like to learn more about how you can reduce credit card debt with the help of a professional debt relief consultant, Strategic Debt Relief can offer expert advice regarding your situation. Fill out our short application online and get an immediate response, or call us at 877-297-4477 for a free consultation today.