For some people having a credit card or multiple credit cards can be a bad thing. If a situation arises in their life that causes them to need immediate money over and extended period, credit card balances can soar out of control. Things like a medical emergency or loss of the primary job can bring about catastrophic debt in a very short time. Manageable debt can become a burden too large to overcome before it is realized. Keeping credit card balances paid down is essential to the financial health of individuals and families. This can be very difficult if the balances are already too large.
Stop charging as soon as you can reduce your living expense enough to allow it.
The problem that many people face is that living expenses cannot be instantly reduced. House payments, utility bills, car payments, and other obligations are not always able to be stopped without further damage to your credit. People are not able to stop eating although sometimes reductions can be made to reduce these types of costs. Make a concerted effort to reduce your cost of living as much as possible so that you can stop stop using your credit cards as extra income. You cannot expect to pay down your balances if you continue to add to them.
Make the effort to get your interest reduced or even negotiate settlements.
If you are unfortunate enough to be drowning in debt, your credit rating is sinking. This can make it difficult to negotiate a lower interest rate on your cards. However, if you are upfront with your creditors and explain that their choice may be either to lower your rate or risk having to write off your entire debt after you clear bankruptcy, they may be willing to deal with you a little more favorably. If you can live without one or more of your cards, you may want to try to negotiate a settlement for less than you owe and better repayment terms. This will impact your credit score in the short run, but eliminating significant debt will help it in the long run.
Avoid adding more accounts or increasing credit limits.
Any extra account that is added will eventually result in more debt. The temptation to use a credit card is too great when you are financially strapped for you to resist. The safest way to go is to just not get more credit cards. Even small credit limits can bite you quickly if you start to use them. More open accounts, even with zero balances, can negatively affect your credit rating.
Plan to pay off your cards one at a time while keeping up the payments on all of your debt.
Target one card to eliminate the debt that it carries. Choose a small one to begin with because you will probably be able to pay it off within a year or less. This will not reduce your payments enough to make a difference, but it will help you credit score, and you will feel the lift of paying one card off. The encouragement should motivate you to take on another one until they are all retired.
If you are not over your head in debt, use wise credit card management to stay that way.
Try to never charge anything because you cannot afford to pay for it. Try to do without it until you can pay cash. Use the cards for convenience and pay the entire balance when the statement comes. If you absolutely cannot pay the entire balance, divide it into two or three pieces and retire it in a month or two. Resist additional charging until this balance is gone.
Never pay only the minimum unless you are in financial trouble, and it is the only way to stay afloat.
Paying double or triple the minimum should be your goal. This is the only real way to make significant reductions in your debt quickly. Credit card companies prefer to see heavy payments so that they believe you are in good financial shape. Find ways to cut corners or get additional income that is targeted toward debt reduction. It has to be a serious project or you will not succeed in reducing and eliminating your debt.
Use a portion of your savings to reduce your debt.
While it is a good idea to have an emergency fund, the interest rate on your savings is about 2 to 4 percent. Even a cheap interest rate on your charge cards is going to be double or triple the high end of your savings interest rate. You need to keep some emergency money, but it costs you a lot more to keep a charge card balance. If you are able to keep your payments up to maintain your credit limit, you can transfer that low interest money onto reducing high interest debt and still have the credit limit for a serious emergency.