Getting out of credit card debt
"I got into some credit card debt, and I thought it was only going to take five years to pay it off. Then my dad showed me that if I stuck with the minimum payment, it was going to take more like 10 years to pay it off. And the interest would be more than twice the original balance in 10 years!"
At first, it may be easy to use your credit card sparingly. Maybe over the first few budget cycles you charged just a few dollars and paid the balance quickly. You were in control.
Self-control, however, can be a fleeting thing. Slowly, your balance may creep up as you buy more than you can afford in a month.
Credit card debt examples
The going credit card rate for students is usually more than 14%, but it can run as high as 18% or more. A $3,000 credit card balance will set you back about $60 per month for almost eight years (assuming an 18% interest rate and no new purchases). On top of that, you will end up spending about $5,600 to pay off that $3,000 balance-provided that you stop spending. That's practically paying back $2 for every $1 you spent in college, or double the original amount you spent.
What you can do
Here are four action steps you can take to help extract yourself from credit card debt:
- Create a debt recovery worksheetfor each card to kick-start your plans for recovery.
- Visit a professional credit counselor.
- Look for part-time job opportunities-and use the money to pay more on your credit card bills.
- Free up more money for credit card payments by revisiting your monthly spending plan and setting spending reduction goals for one or two cost categories. Use the online financial calculator to figure out "How Long Will It Take To Pay Off My Credit Card?". This calculator allow you to put in a proposed additional monthly payment to show you how much sooner you would be able to pay the balance.
Be resourceful, but be sensible, too. Don't fall for pawnshop loan come-ons or payday loans. These merchants usually charge exorbitant fees and interest rates.
For more information and advice on how to get out of debt, visit the National Foundation for Credit Counseling Web site.