How to Reduce or Pay Off Credit Card Debt

Learning how to reduce or pay off credit card debt is something we should all learn. It is very easy to get into debt with a credit card, sometimes way over our heads. After all, it's not real money - a credit card is only a bit of plastic.

That is the thinking that gets us into trouble because that little square of plastic with your name on it is not only exactly the same as real money, it is a fast ticket to the debtors court if we are not extremely careful how we use it.

Credit card debt is sadly a symbol of modern society. With the advent of the internet, we suddenly found ourselves having to use a credit card to access online services.

Before that, credit cards were not something that everyone had, but they were handy for paying for goods and services without worrying about carrying cash around with us.

Banks and financial institutions themselves pushed us into using credit cards, with special offers and deals, and advertisements everywhere about how much safer we were with plastic credit cards instead of cash.

Of course, as everyone now knows, credit cards soon become indispensable. You're not fully dressed if you leave home without one. No matter how much you promise yourself that you won't use them except in emergencies, you still use them for those moments when you are nowhere near a bank to withdraw cash.

Unfortunately, no matter how good our intentions were, many of us fell into the debt trap through using credit cards, and now we need to know how to reduce or pay off credit card debt that become too big a burden for us.

If you pay off your credit card bill in full each month, by the date written on your bill, there is no interest.

Many of us, especially when we first start using credit cards, pay this bill in full each month and so stay debt-free.

But credit card companies are sneaky.

After a few months of perfect credit and responsible usage, they suddenly announce that you are a great customer and raise your credit level - the amount you can put on your card each month.

You may have initially set it to an affordable level of your monthly disposable income, but now it is higher than you originally asked for.

That's OK, you just won't use the extra.

And maybe you don't for a while. Then the credit card company offers you yet more money, and sends you letters praising you for being a great customer and how this is their reward to you.

But you know it is more debt that you can afford, so you don't use it....for a time.

Then one day you do use your credit card up to its limit, because you have to. The car insurance has expired and needs renewing. On the very same day your oldest comes in from school and announces they just have to get new shoes because they have burst and their toe is showing through the top.

You had money set aside for the car insurance but not for the shoes. They go on the credit card. Then you bump your car. The insurance excess is a couple of hundred bucks and you have to pay it out today or the garage won't fix your car and you need it.

Well, there could be a million reasons why you started spending that extra money the credit card company let you have, but now the debt is too high to pay off in full each month, so you have to start paying interest. HOW HIGH??

Now your debt is piling up. The interest on the interest is extortionate, and you are still using your card for small things because your spare money is gone in paying the high interest repayments to the credit card company.

Take a deep breath and sit down. With a pen and paper, write down all your monthly income. In a different column, write down all your expenses. Don't miss any out - even the kids after-school club money.

Take the credit card debt out of the equation, look at your day to day living expenses.

What you have left over at the end of the month can go towards your credit card debt.

There are three sensible things you must do here.

1. Cut down where possible on your outgoings.

• Food buying is usually a huge part of that. Look how much cheaper it is to buy fresh foods and cook them yourself as opposed to buy ready-made meals or fast foods.
• Electricity or gas usage. Consider ways of using less in your household. Switch off lights, switch your TV off at the mains at night instead of leaving it on stand-by. Turning your hot water thermostat down by just a couple of degrees can save you $$$ over a year.
• Consider walking to the shops instead of driving, especially if they are nearby.

2. Contact your credit card company! This is really important.

• They cannot help if they do not know you are struggling, even if they caused the problem in the first place by allowing your more credit than you could hope to repay.
• Arrange a monthly payment that you can afford. You have already worked out what you can afford. Offer them that. Chances are they will accept because taking you to court is not good for their business. They want your money and the interest you will have to pay.
• Once you start paying to the plan you have agreed, keep paying. Contact them if you have to miss a payment for any reason. Don't just not pay it and hope they will understand. They won't.
• Try and negotiate your credit card debt with them. Once you are on a fixed payment they may be willing to reduce the interest they charge.

Eventually, the debt will be repaid, even if it takes years.

3. Cut up your credit card.

• You can get a debit card instead which can be used in shops or for services that will take the money straight out of your bank account.
• Debit cards negate the need to carry cash, but will not allow you to spend, spend, spend.