Best way to get rid of credit card debt?

iVillage Member
Registered: 07-03-2005
Best way to get rid of credit card debt?
4
Thu, 07-07-2005 - 5:41pm

I need help!

I'm only 22 years old and seem to have incurred $18,000 in credit card debt. VERY STUPID, I know. I have changed my spending habits and no longer charge things on my credit card.. I only buy what I can afford at that very moment.

But my problem is that now I have these enormous credit card bills with outrageous interest rates. I'm never going to be able to pay them off at this rate.

I was told about two options that sound slightly promising..

One person told me to try debt consolidation. I'm not really sure how this works though. I know they consolidate everything into one monthly payment and lower the interest rates or whatever.. But is there some sort of monthly fee involved in this service? Is this the best (and quickest!) way to go?

Another person told me to always pay more than the minimum balance. And also to make payments every two weeks on my credit card bills. That way you'll be paying off more than just the interest and will get your debt down faster.

Which of these is the best idea? Or is there an even better idea?

I'm young and I don't to be saddled to this debt for a huge chunk of my adult life! But more than that I don't want to damage my credit. At this point I can still handle the payments.. I'm never late or anything.. But I feel like it's not doing any good to just pay the minimum payments. I know it's not going to go away overnight. But I've changed my spending habits and I'm ready to do what I need to to become debt free.

Someone please help!! Thanks!

iVillage Member
Registered: 03-22-2005
Thu, 07-07-2005 - 8:50pm

If you have only debt from credit card, I am not sure how you are going to "consolidate" that. By all means pay as much as you could everytime you get the bill and certainly more than the minimum. Basically regardless of your income, you need to:
1. Put some in an emergency account - to the amount of what you could live on for 3 to 6 months. I see that on your profile you are living at home, and if you have understanding parents, you may skip this until the credit card debt is all paid off.
2. Apart from necessary expenses (such as food, medical, insurance, etc. - the "needs", not the "wants"), put whatever you have into re-paying the credit card, and never be late on your payments.
3. After a period of timely payment and paying over the minimum, you may receive offers from other credit card companies offering lower interest rate for transfer. If that is the case, try transfering your balance to a lower interest rate card and cut up your current credit card.
4. Repeat #2 until it is all paid off. Then start an emergency account.

It will also be helpful to sit down and do a budget so you know exactly how much you could afford to pay and how long it will take to pay it off.

Good luck!

iVillage Member
Registered: 07-03-2005
Thu, 07-07-2005 - 9:29pm

Don't worry! I am in the same situation (23 years old and $18,000 of debt). It can be very frustrating but we have plenty of time to work things out and get back on our feet.

If you have more than one credit card try to see if your credit card company will offer you a low interest rate for balance transfers (be careful of any fees that may apply). If that is not an option, focus on paying off the cards with the highest interest rate first. Put any extra money you have towards the highest rate card and pay only the minimum on the other cards. Once you have paid that off, move to the next highest rate card, and repeat, repeat, repeat.

Also, you are right. If you can pay 2 times per month as opposed to once a month you will be saving money because interest is calculated off of your daily average balance.

Try to keep track of all the money you spend and figure out ways to cut back. I use Quicken to manage my money and it is very helpful. Cut out any unnecessary expenditures and put all of that money towards your credit card.

Set a goal for yourself and find a way to keep yourself accountable. I started a blog to keep myself motivated and it is really helping me stay focused.

Check it out!
http://thedebtdefier.blogspot.com

I hope this helps. Good luck!

iVillage Member
Registered: 07-03-2005
Fri, 07-08-2005 - 10:34pm

Thank you both for your suggestions. I don't feel quite so helpless!

Lpkitten, I like your idea. Your blogspot thing is cute. =) You sound like me.. I need my Netflix! =)

Thanks again.

iVillage Member
Registered: 08-16-2004
Sat, 07-09-2005 - 6:16pm

Sounds like you have already done the first step: put the cards away and don't use them until they are paid.

second step: emergency fund. Dave Ramsey is right about that. I can't begin to tell you how many times I pulled out that CC for an "emergency" Not usually for all that much, either, a couple hundred here, a couple hundred there.

third step: figure out a plan. I went with a CCCS to get the interest down. But whatever plan you make, stick with it.

And major addendum. watch out for robbing Peter to pay Paul. Things a little tight, putting that cable bill on the mastercard is just bad bad news. If I had dealt with this problem when I started doing this, I think I'd have had 50K to pay off instead of 103K

Good luck! You are smart to get a handle on this at your age. Much harder to do later.

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