The Simple $10 Debt Elimination Solution
by James H. Dimmitt
Ask a friend what resolutions they made for 2004 and your bound to
hear them reply "Pay off my credit cards." Ask them how they
planned on reaching that goal and many of them will not have a clear
cut answer.
The obvious first step to paying off credit card debt or paying down
credit debt load is to cut back or eliminate the use of your credit
cards. For some people this first step can often be the most difficult.
If you're used to spending freely with plastic and worrying about the
consequences later, it's difficult to break free from this "buy
now, pay later" attitude.
To gain control of their careless credit card spending habits, some
people cut up their credit cards therefore making it impossible to use
them. Others lock up their credit cards or hide them in a safe place
and vow to use them only in an emergency.
The second step to paying down credit debt is to pay more than the
minimum balance due. Most credit card companies require a minimum monthly
payment of 2.5% of the outstanding balance. For example, if you have
an outstanding balance of $1100.00 on a credit card charging an Annual
Percentage Rate (APR) of 18.9% your minimum monthly payment would be
$27.50. It will take you 66 months or 5.5 years to pay off your balance
of $1100.00 making the minimum payments. The credit card company will
make $676.94 in interest from your use of their credit card.
Monthly payments are purposely kept low by the credit card companies
so that they can earn as much as possible from the interest rate charged
to you the consumer. Paying just the minimum payment will keep you tangled
in credit's web for years and years to come.
If you've been paying only the minimum due month after month, ask yourself
this question, "Do I have an extra $10.00 I could apply to this
month's payment?" I'm sure that most of us could find some way
to come up with an extra $10.00 for the month. Try cutting out a few
cups of coffee or lunches at your nearby fast food outlets and in no
time flat you'll have saved up the extra money that you need.
Now, it's time to unveil "The Simple $10.00 Debt Elimination Solution."
Take that extra $10.00 and add it to the minimum monthly payment above,
therefore making a payment of $37.50. By adding just that $10.00 a month
to your minimum payment, you'll trim 23 months or nearly two years off
of that credit debt!
On top of that you'll save $277.00 in interest alone! That's money you
can put toward savings or paying off other debts. Imagine how much you'd
be able to save if you applied this same simple strategy to each of
your other credit card debts!
Paying down credit debt doesn't always mean having to make huge monthly
payments or sacrifices. It just takes some basic planning and a simple
effective strategy to make it work.
© 2004, www.yourfreecreditreportnow.com
Author: James H. Dimmitt. James is editor of "TO YOUR CREDIT",
a weekly free newsletter to help you manage your personal finances.
Subscribe to the newsletter by visiting
http://www.yourfreecreditreportnow.com.
He is also author of "Identity Theft - How to Avoid Becoming the
Next Victim!" available at http://tinyurl.com/bc45
