Reducing Credit Card Debt

Short Description
Adapted from Get Rid of Credit Card Debt, written by Pat Hildebrand, … To reduce your credit card debt you need to. plan how you want to do it. …

Website: extension.usu.edu | Filesize: 649kb

Content
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FINANCIAL FITNESS
Fact Sheet
November 2001 FL/FF-13
REDUCING CREDIT CARD DEBT
Barbara R. Rowe, Ph.D.
Professor and Family Resource Management Extension Specialist
Utah State University1
Using a credit card changes your spending
power. The greatest disadvantage of credit use is
losing financial flexibility in managing today’s
money. For example, if your credit debt takes 10
percent or more of your after-tax income, you can’t
spend those dollars for something else. Credit cards
can reduce your future buying power if you carry a
balance and let finance charges built up.
How can you get rid of your credit card
debt? The first thing to do is get all your credit card
bills together. For each account, write down the
total balance and the minimum monthly payment
required. You can use the table below.
Credit Card Account Number Amount Owed Minimum Payment Interest Rate
1Adapted from Get Rid of Credit Card Debt, written by Pat Hildebrand, University of Illinois Cooperative
Extension Service, Urbana-Champaign, IL.Financial Fitness ‘ Financial Fitness ‘ Financial Fitness
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Develop a plan
To reduce your credit card debt you need to
plan how you want to do it. First, gather all
your credit card bills together and complete
the table on page one.
Then look at your different debts and set
priorities for your repayments. Which debt
will you pay first? Choose strategies from
those discussed. Once you have a plan, you
are on your way to reducing your debt.
Prioritize Repayments
Credit card companies require a minimum
payment each month. The next step in reducing
credit debt is to be sure you can make the minimum
payments on your credit cards. Look at your
spending and see if you need to make cuts to find
the money to pay your credit card bills.
If you pay only the minimum payment
required each month, it can take a very long time to
clear your balance. For example, if you have a
$3,000 balance at 18.9% interest and you pay
$50.00 toward the balance each month (a typical
minimum payment), it will take you 15 years and 6
months to pay off your debt. And it would cost…