Well, worry no more as I will provide you with some suggestions to help reduce and hopefully ‘free’ you from your credit card debt. However, be WARNED! This challenge is not for the faint-hearted and will probably require gut-wrenching sacrifices, financial prudence and maybe even divine intervention. Notwithstanding the foregoing, if we invoke the biblical injunction of ‘I can do all things through Christ who strengthens me’ and the first tenet of the optimist creed which commands that we ‘promise ourselves to be so strong that nothing can disturb our peace of mind’; we are ready to delve into the pursuit of credit card freedom.

Your aim in managing your credit card debt is to have one primary credit card (preferably denominated in local currency, if you do not earn foreign exchange) which you should use for emergencies, necessities or purchases that you can repay within a 1-2 month period. Firstly, do not accept limits above an amount that you can repay in three months. Secondly, resist conspicuous spending (I know it’s easier said than done). Now that we have taken a peak into what seems to be credit card fantasy land, let us look at some methodologies that may make the dream reality.

FORMULA TO ‘FREE’ YOURSELF FROM CREDIT CARD DEBT

Find out your status.
To correct the problem, we must first examine the current situation. If the information is not readily available on your credit card statements or online, please contact your financial institution immediately and ask these pertinent questions: What are the current interest rates and the balance(s) on my credit card(s)? What are the other fees associated with my card? What is my statement date and explain how I can extend my credit usage by knowing this date? Do you offer facilities at lower interest rates on a reducing balance basis to liquidate credit cards?

The objective is to always operate credit cards with the lowest interest rates, little or no fees and to maximize the use of the credit period available to minimize interest. Additionally, because the liabilities are already on their books, financial institutions may elect to refinance your credit card, subject to applicable conditions, if you ask.

Armed with the answers to these questions, the next step is to prepare a budget and assess your monthly income and expenditure. For many people, when they put their budget on paper, they realize that they are spending more than they actually earn. This budget deficit is usually financed by credit cards, monies borrowed informally or personal loans from an institution. The shortfall in the budget is what must be addressed to liberate you from the debt mire. The reduction of one’s expenses is a basic concept that if applied with determination and strong resolve, will result in a manageable standard of living and more cash for debt reduction. REALITY CHECK – to extricate yourself from debt you need to either reduce spending or increase your income. I know it seems impossible in these challenging economic times, but you MUST find a way to win the small battles (incremental increases in income and small reduction in expenses), in an effort to win the war against debt. YES YOU CAN!

Reduce your credit card debts.
The fundamental rule of operating a credit card is to repay the outstanding balance in full each month, on or before the due date, and use the card for convenience within budget. For the record, based on how credit card systems operate, if your payment is one cent short, you pay full interest on the entire balance for the applicable statement period. If total liquidation proves to be a challenge, then you should do everything possible to try and pay above the monthly minimum requirement to steadily reduce the debt. The aim should be to always have a source of repayment like a partner draw, cash surrender value on a life insurance policy or salary payment to liquidate the debt created by purchases, in the shortest possible time. Additionally, you should use your credit card on a monthly basis to pay as many of your bills as possible, as this will result in the reduction of your monthly interest payments.

Notwithstanding the foregoing, the reality is that somewhere along the line we may have lost focus, lacked discipline or just had to charge something to our credit card as a last resort. To get back on track, review the purchases that were charged to your credit card and source funds to treat them with forthwith. You may be surprised at the amount of money you spend flippantly or on conspicuous consumption, without having a defined source of repayment. It is imperative that we learn from this experience and not have a repeat in the future. Create a purchasing and payment plan, but ensure that you stick to it.

Do you have more than one credit card with limits totally exhausted? You may elect to borrow from a friend or family member (hopefully interest-free) or reduce your savings to assist in reducing your credit card debt. Because the interest rate on the credit card is higher, you can begin saving the interest charges that you have not incurred each month to replenish your resources. Another way to deal with such a dilemma is to identify the card with the highest interest rate and make the highest possible payment before the due date (you may elect to convert foreign currency cards for comparison). Every effort should be made to pay above the monthly minimum on the other cards but focus your energies on the card with the highest interest rate. After total liquidation, focus on the card next in line in terms of high interest rate until your debts are repaid. Ironically, some persons may prefer to repay the card with the lowest balance first in an effort to reduce the number of payments. Whilst not being the most effective method, this facilitates peace of mind and will provide excellent motivation to keep you focused and committed to reducing your credit card debt. After achieving your objective, use one credit card that has the lowest interest rate.

Explore lower cost options.
Exploring lower cost does not only speak to lower interest rate facilities, but includes a review of switching costs such as commitment and documentation fees to ensure a cheaper alternative. If possible, try to have your credit card debts transferred to a credit card with a lower interest rate or a loan, to allow a monthly reduction of principal. As mentioned earlier, many financial institutions offer debt consolidation facilities which allow customers to merge all their existing debts, including credit card debts, into one affordable facility at a lower interest rate. There are opportunities to be gleaned from your challenges and excellent solutions are available to deal with your situation.

Evaluate your status frequently.
Always look for ways to improve your budget and make sure it is working for you. It doesn’t matter if you are a busy professional with limited time on your hands; an individual who needs protection and professional supervision of their financial affairs, or just a couple trying to eliminate the stress and pressure of juggling the family finances and paying the bills, frequent reassessment is a MUST. Make a budget, stick to it and adjust it frequently to adapt to life’s ever-changing scenarios.

The old adage says ‘nothing in life is free’ and this is as true today as it ever was. The idea that a credit card is ‘free’ money is the beginning of the credit card debt trap. Of course, having a credit card has distinct advantages if you manage it effectively by buying what is necessary, making sure your expenses correspond with your income and plan your expenses ahead of time. Having a credit card for travel is also good, as it reduces the need for cash and of course, it will become handy in emergencies. A credit card is an instrument that offers convenience, security and when used properly, peace of mind.

This ‘FREE’ formula is merely a guide that renders itself useless if no action is taken. It will require an investment of time to research the options by calling financial institutions to compare, reading literature to better educate yourself and most importantly, EXECUTING the plan created to ‘FREE’ yourself from your credit card debt.

Unfortunately, cheques are not accepted at a number of business places. This leaves us with the credit card. For some persons having a credit card connotes a particular lifestyle. It allows you the freedom to have what you desire within the limitations on the card (the amount that the card is valued at). It is also accepted at most business places and can be used for online transactions. However, the possibility of having money to use for your every whim can lead to bad credit for some if they are not careful with the card. Hence, credit cardholders need to be aware of their spending habits.

Being careless with a credit card can lead to a number of problems. A common cause of bad credit is ‘late payment’. This indicates to the credit card company that you were not able to pay your bills on time or that you forgot to pay your bill. It is important to always pay a portion of the money that you used from the card in the prescribed time for payments. If you pay your credit card bill late it stays on your account for years and tells the agency (from which you got the card) that you are a high-risk client. As a result your credit score will decrease making future loans cost you more. Your payment is late if it is thirty days, sixty days, ninety days and one hundred and twenty days after the due date for payment.

The solution to this problem is simply to pay your bill on time. Some persons have a high limit on their credit card, which allows them to be able to attach bills to the card. If you have bills (utilities, car payment and so on) attached to your credit card ensure that they are paid on time or remove them from the card. It is tempting to have the power to spend as much as you like but if you overcharge your card then you are liable to lose it.

Another factor that can lead to bad credit is that of inquiries. This happens when a company looks at your credit report for the possibility of giving you credit. This can be from a credit card company, utility company or mortgage company. The problem is that it usually takes thirty to sixty days for credit to show up on a report so even if you have been approved for credit cards a couple of weeks before it is not reflected on your report but the inquiries show it. As a result the company may refuse you the card for fear of you abusing it. This situation can be helped as inquiries fall off in six months to a year. The inquiries are done mainly to protect the company that is doing the inquiry from fraud.

Other causes of bad credit are charge-offs, repossession and foreclosure. Companies will do a chare-off if they realize that a customer has not paid a bill in a long time and does not intend to pay it. They write it off on the books as bad debt or a loss and this leaves a mark on your credit report for approximately seven years, which puts you in a delicate position for obtaining credit from other companies. If you are having problems paying your bills then it is suggested that you look into debt settlement or a Consolidation Company. Repossession involves the bank reclaiming a vehicle that was bought on a credit card that exceeds the amount of credit that was issued to the cardholder. This is the bank’s way of recouping money from the car. Other items can be repossessed as well such as appliances, machinery and so on. To avoid repossession the customer should try to avoid purchasing items that exceed the credit limit.

Have you ever witnessed a house being repossessed by the company from which it was purchased or the bank? This is called foreclosure. In this case persons are evicted from the home. This takes a longer while but when it does it is embarrassing to those involved. If you are not able to pay for the house selling it may not be a bad idea. This way you can avoid embarrassment and get somewhere that is affordable.

In conclusion, a credit can be a dream but if it is abused it could fast become a financial nightmare for the person who has it. If you know that you are unable to maintain the payments on a credit card because of your spending habits consider other options. Whatever you decide make it work for you.

1. Credit cards are essentially a loan, which means at some time you will have to repay. Plan your purchases carefully. If you are in doubt about how you will repay your card, then don’t make that purchase.

2. If you have high balances on your credit cards, by taking a loan with a lower interest rate you will save money and protect your credit history.

3. Your bank wants to see you do well. Your bank representative should be the first person you talk to in times of trouble. Take the opportunity now to take advantage of his or her financial knowledge.

4. Start an emergency fund. You will worry less when you have a cushion. It may not start with much, but having something in the bank will make you feel more comfortable.

5. Never abandon your debt. No matter how bad things are, you can usually find a way to manage paying your minimum payment. When times improve, a bad debt will disqualify you from certain loan facilities and hurt your credit history. If you see trouble on the horizon, ask a bank representative for help.