How Do I Lower My Credit Card Bills?

The average household credit-card debt in the United States stood at $8,329 at the end of 2008, according to the 2009 Nilson Report. That figure is all the more incredible when you consider that it includes households that don't have any credit cards at all. If your credit-card debt has spiraled out of control, don't panic; there are steps you can take to lower these bills.

Change the way you pay

Your credit-card company would like you to pay the same way every month, by sending in your minimum payment once every billing period. Problem is, by paying this way, it'll take you a long time to pay off your credit-card debt. This is good for your credit-card company because it'll be able to collect more interest from your debt.

If you owe the household average of $8,329 on your credit card with an industry standard, according to indexcreditcards.com, interest rate of 14.58 percent, it will take you 59 months to pay off your debt if you send a minimum payment of $200 each month. That's assuming, of course, that you're not adding additional debt to the card.

It's wise, then, to change the way you pay your credit-card company.

First, never send in only the minimum required payment. If you do this, you'll barely pay off any of your principal each month. Instead, most of your money will go toward interest. This is no way to reduce your balance, and simply sends more money to your creditors over time. Search your budget and find some way to at least double your minimum monthly payment each time you send in a check. This will dramatically reduce the amount of time it takes you to pay off your credit-card bill.

In the example above, it will take you just 25 months to pay off that $8,329 debt if you send in $400 each month instead of $200.

Pay more often

You can cut down the amount of time it takes to pay down your credit-card debt by sending in the same payment as usual, but by breaking it into two smaller payments that you send your credit-card company every two weeks. This helps on two fronts: First, you'll reduce the amount of interest you are charged over the life of your debt. Secondly, you'll make 13 payments during the year instead of 12.

Before taking this strategy, though, you should check with your credit-card company to make sure that it allows this payment strategy.

Cut down those interest rates

According to credit-card information source indexcreditcards.com, the average interest rate for credit cards stood at 14.58 percent as of early November 2009. If possible, lower the amount of interest you pay during the lifetime of your credit-card debt by transferring your unpaid balances from high-interest-rate cards to ones with lower rates. This can save you a significant amount of money as you pay down your credit-card debt.

Be careful, though, before switching your balances. Make sure that you read the fine print that accompanies your new card. That interest rate of 5.5 percent might not last more than a month.

By taking these simple steps, you'll make paying down your credit-card debt less stressful. Remember, though, that you won't eliminate this debt if you continue to add more to your cards each month than you can afford to pay off.