Reducing Credit Card Debt

The best way to improve your personal financial situation and to free up money for investing is by reducing your debt — especially costly credit card debt. In these days of easy credit, most people find their mailboxes stuffed daily with credit card offers from banks and other companies. It’s temptingly easy to accept the offers, run up a balance with purchases, and then switch to yet another card.

The unwary person who owns and uses several credit cards can find himself carrying a total debt equal to half or more of his yearly income — an uncomfortable, costly, and dangerous way of life.

My advice is to put on hold your desire to invest if you still have credit card debt unless you will find an investment instrument that will pay you more than the interest you will be paying for your credit card debt. It would be a wise move to pay your credit card debt first, then use your allocation for credit payment to invest.

If you take the following steps to reduce the debt drain on your finances, you’ll soon see your investment fund growing:

1. Pay off credit card balances as soon as you can. At interest rates of 3% per month or 36% annually (some even have higher interest rates) these are among the most expensive loans offered anywhere. The longer you take to repay them, the more each purchase costs.
2. Start paying your total credit card balance each month rather than the minimum amount. This will force you to begin living on your current income instead of mortgaging your future for present purchases.
3.  When shopping control your emotions and don't get impulse buying dictate you. Evaluate first the time, whether it is a need or a want. If you list down the things that you bought with your credit card, you will be surprise that most of those things are wants rather than needs.
4. If you are a minimum income earner, call your credit card company to cancel your card. Believe me, it is no use for you to have a credit card because you cannot afford the cost of maintaining it.
5. Live below your means.

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