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Pay Off Credit Cards – Tips to Overcome Debt and Obtain Financial Freedom



Deciding to pay off credit cards is one of the smartest financial decisions you can make. Unfortunately, many Americans have become addicted to credit cards. We use them for everything and whip out our plastic without ever stopping to think how we are going to repay our debts. The problem is millions of people have fallen into a financial trap which is quickly leading them to bankruptcy.

In order to pay off credit cards, the first thing you need to do is stop using them. Experts suggest cutting up cards to avoid temptation. However, a large percentage of people would rather cut off their right hand than their plastic. If you can’t bring yourself to destroy your credit cards, at least remove them from your wallet and safely store them away. Consider using a bank safe deposit box. Your credit cards will be protected by the bank and out of your house; helping reduce temptation and ease of use.

Next, you need to develop a plan to pay off credit card debts. Some financial experts recommend paying off cards with large balances first. Others recommend paying off small balances first, then attacking the larger balanced cards. The one thing experts agree on is paying off credit cards with the highest rate of interest, regardless of the balance due.

The goal of any debt elimination plan is to create a plan you can actually adhere to. While it is tempting to go all-out and eradicate all debt in a short period of time, few people can actually accomplish that goal. Keep in mind it took a long time to create this financial mess and it will take a while to get out from under it.

If creating a financial plan becomes too difficult, consider obtaining credit counseling. By having a professional review your finances, you can gain a better understanding of your spending habits. Credit counselors can offer suggestions on the best strategy to pay off credit cards and outstanding debts. In some instances, credit counselors can help negotiate with your creditors to reduce interest rates, eliminate late fees or reduce balances.

Another option for paying off credit cards is through debt consolidation. This option is not without risk and should be given careful consideration. Debt consolidation loans are usually reserved for homeowners. Using the equity in your home, mortgage lenders provide a second loan using your home as collateral. Outstanding debts are paid off with the monies received from the home equity loan.

While it can be tempting to pay off credit cards using a home equity loan, consider the fact that home equity loans are paid over 10 to 15 years. By extending the terms, you could potentially be paying considerably more in the long run. Be certain to calculate the true cost of debt consolidation loans before using your home to secure a second mortgage note.

Debtors with substantial credit card debt might benefit from debt settlement. While this technique can reduce the amount of debt owed, it can seriously blemish your credit. Debt settlement is generally negotiated through debt settlement companies or law firms. Debt settlers negotiate with creditors to reduce outstanding balances by as much as 50-percent.

Debt settlement companies generally charge a fee based on a percentage of the debtor’s overall debt. For instance, if you owe $100,000 in debt, the debt settlement company may charge $10,000. While this may sound like a lot of money, keep in mind debt settlers might be able to reduce that $100,000 down to $50,000. Even paying $10,000 in fees, you will still be saving $40,000.

The consequences of debt settlement may outweigh the benefits. Be certain you understand the pros and cons should you decide to use debt settlement to pay off credit cards.

By: Simon Volkov

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This entry was posted on Sunday, April 18th, 2010 at 9:56 am and is filed under Article. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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