Credit cards

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Do not get in to credit card debt, period! It’s as simple as that. If you have any, destroy them! If you do not want to watch your money go down the drain, do not have credit cards. You should always pay off your credit card debt before you even start to invest any money. Especially the credit cards with the highest rates. By avoiding high interest credit cards, you would save more money than you would have earned with investment account.

Rather than use credit cards to live outside of your income, focus on eliminating credit card debt and switch to paying cash for everything. If you are using your extra cash monthly to make your credit card payments, you will never be able to save much meet your financial goals.

If you already have credit card debt, pay it off as quickly as possible. There are two strategies to accomplish this.

Pay off the highest interest debt first. This will allow you to pay off the card that is costing you the most money over time. Credit card balances will most likely be at the top of your list. With the interest rate most likely being higher than any rate of return you would earn by investing, it makes the most sense to pay credit card debt off as quickly as possible. One other way to think about paying off your high-interest balances first, it amounts to its own way of investing. If you eliminate a credit card balance that has an interest rate of say 24%, it’s like a 24% return on your investment.

Paying off the credit card with the smallest balance irregardless what the interest rate is. This will allow you those small wins and the motivation it provides.  You get out of debt when you get furious and committed! Paying off the smallest debt first will allow you to get those immediate wins and positive feedback that will encourage you to keep going. Once the smaller debts are paid off, you’ll want to keep going. As you pay off each debt, add the payment to the next debts payment.

Negotiate a lower interest rate. This will save you money in the long run. Most credit card companies will do this in an effort to keep you as a valuable customer. Settle your debts by yourself. If you’re having difficulty making monthly payments on your credit cards, contact your creditors and settle the debt on your own. If you can settle your debts yourself, you can get rid of credit card debt much quicker. Make on-time payments. Try to make payments by the due date. Use automatic payments to avoid making a late payment, eliminating the chances of any late fee being charged on your accounts.

Use savings and investment. You can take cash out of your savings and investment accounts in order to pay off credit cards, as long as  the post-tax return on investment is lower than the post-tax interest rate expense on your credit card.

Do not acquire any new debt. Do not apply for any new credit cards or loans until you pay off all your debt and get your finances back on track. It is very difficult to pay off credit cards when you keep accumulating new debt every month. Avoid using your credit cards when making a purchases. Use plain cash, check or debit cards to pay for purchases.

Here are some strategies to help you avoid excessive debt:

Make a budget, and stick to it.
Set realistic financial goals.

Don’t buy what you can’t afford.

Pay with cash whenever possible.

Pay your bills on time and avoid late fees.

Pay more than the minimum balance on your credit card accounts. Monitor your accounts for changes in rates or fees

If your credit card debt is too high spread over numerous credit cards, a debt consolidation loan may be right for you. But don’t take on anyone any additional debt. So if you’re in that boat, consolidation and refinancing might be worth a look.

Credit card providers are now using unsolicited credit limit increases to tempt you into more debt. This is a very dangerous practice and you should reject the change.