Debt Tricks

Being knee deep in debt is not fun at all. The constant worrying and wondering which bills to pay can be stressful. Getting out of debt is a painful process that requires patience and perseverance. There are some tricks, however that can make the process a little less daunting in nature. The key of course is to remain optimistic and know that all of your hard work will pay off in the end.

The Snowball Plan

Dave Ramsey, an online financial adviser, suggests on his site that consumers follow the "debt snowball plan." The plan calls for concentrating on paying your smallest debt first until it is paid off, then start on the next smallest until eventually all debt is paid. The plan requires that minimum payments will continue on the other cards while the user puts additional funds to the lowest debts. This advice is contrary to conventional wisdom, which advises paying off higher interest debt first, which allows a savings on interest paid. Ramsey suggests that there is a psychological component to debt management and the emotional high that comes from paying off a debt will spur the consumer to keep going on her debt repayment plan.

Building up an Emergency Fund

You may not think that building an emergency fund is a way out of debt but it is. Think of the many times that you use your credit card to cover life's little emergencies such as auto, home and health. Saving a set amount each month to build up a fund to cover these instances will allow you to stop using your credit card and building up a debt balance. Once you have about $1,000 set aside, then you can start funneling the money you were setting aside for savings over to credit card payments. You have built up the discipline to save the money each month, so you are well on your way.

Calling the Credit Card Companies

If you are paying high annual fees or higher than average interest rates, then it is time to call the credit card companies. If you have been a good customer or have had your card for a while, the credit card company will not want to lose you and will be willing to negotiate with you. Depending on your situation, you may be able to negotiate a lower interest rate or a reduction or cancellation of the annual fee. It never hurts to ask.

Consolidating Credit Cards

One way to pay down credit cards a little quicker is to take advantage of low or no transfer fee card offers with a low introductory rate. By consolidating high-interest-rate credit cards onto a lower interest rate card, you may be able to pay the balance down quicker. Consumers opting to consolidate need to be careful that the rate charged after the introductory period is not higher than what they are currently paying. It also is important to be diligent and to pay down the balance and not use the cards that now have a zero balance.