If you are like most Americans, it is not uncommon to have spent a bit more on your credit card each month than you have coming in your paycheck. That has simply become a fact of life in our consumer culture. The instant gratification habit has overwhelmed our better judgment when it comes to managing our personal finances.
And, it can be equally common for Americans to rely on the ubiquitous "minimum payments" option to keep the credit card companies at bay for another month. That credit card minimum payment is now averaging 4%, by the way, up from the old industry standard of 2% of outstanding balances. This change was foisted on the banking industry by a congress that was nervous of the financial and political impact of an indebted credit card constituency.
But, even with a doubling of the minimum payment rate, it can still take many, many years before a debt is paid down at that rate. It is simply imperative to begin aggressively attacking the principal of the debt and not just service the interest payments. Otherwise you will be on a perpetual treadmill of credit card debt.
The tried and true credit card debt elimination strategies still hold true, even in today's fast paced world. They are to simply stop adding fuel to the fire and begin chipping away at the core problem. For example, if you have $9,000 of outstanding credit card debt at 14% interest (the national average by the way), the best approach is to stop using your credit cards for new purchases and transfer the balances to a low interest credit card. Then, begin aggressively paying down that new credit card (which you will not use for new purchases, either). Without the burden of interest payments, coupled with a little financial self-discipline, you will be amazed at how quickly you will find yourself coming up for fresh air and becoming debt free.
But what if you think you really need all those existing credit cards to get through life? Well, it's probably okay to keep one in a drawer for emergencies, but having a wallet full of high interest credit cards is not a good idea for anyone. And, it's especially not a good idea for someone in serious credit card debt. Simply put yourself on a credit card diet and begin paying for things with a debit card, check or cash.
And, concerning how to approach financial self-discipline, a good first step is to try writing down everything you spend for 30 days. This can be a very illuminating exercise because it will show you how much money you (like most of us) waste each month on unnecessary purchases. By simply eliminating just a portion of these daily expenditures (whether it is skipping the $3 Starbucks double latte or deciding to eat lunch at your desk instead of going out), you can save an amazing amount of cash each month. And, if you can further discipline yourself to apply these savings to your credit card debt, which by now you have wisely transferred to a 0% APR credit card, you can become debt free in record time.