Financial freedom is a phrase that we have all heard and want to achieve. Well, one of the best steps you can take in the New Year toward this goal is paying off credit card and revolving debt.
Credit card and revolving debt is a major problem in this country. The interest rate on these types of debt can run as high as 30-35 percent APR. These high interest rates make it difficult for people to pay down their debt — especially if you’re only making the minimum payment. In fact, just making minimum payments can end up costing thousands of dollars in finance charges and take years to payoff, even for a small balance. That $100 you put on your credit card, could end up costing you many times over that amount in interest payments and late fees.
The good news is, you can get out of debt, if you follow a few basic steps and put a plan in place.
First, list each of your credit cards and revolving debt. You’ll want to include the outstanding balance, interest rate and minimum payment. You can find this information on your monthly statement.
List the debt in order from the highest interest rate to the lowest.
The monthly minimum is the absolute lowest monthly payment you want to pay, remember those nasty late fees. If at all possible pay more than the minimum in order to repay the debt quickly.
As your payments come due, pay the minimum on each debt except for the one at the top of your list. Remember, that one has the highest interest rate and it’s costing you the most money by maintaining a balance. So whatever additional money you budgeted, apply it to that debt.
Continue this process until the first debt is paid off. When that debt is paid off, take the amount you were paying on the first debt in addition to the minimum payment and apply it to the second debt on your list.
Continue the process until all debts are paid off.
For some additional debt management tools, go to my website at www.wrightfg.com, select “calculators” from home page and then select “credit.”
Good luck, and make it a goal to be credit card debt free by the end of 2011. –curtis wright