Debt consolidation agencies and credit counselors make promises to help reduce your credit card debt faster. While these agencies may prove effective, they tend to charge a service fee for managing your debt. Rather than pay someone to erase your debt, consider ways to reduce credit card debt on your own.
Consolidation Options
It's possible to consolidate your credit card debt without using a professional agency. Consolidation often results in cheaper interest rates, which helps you reduce the principal on your credit cards faster and eliminate the balance in less time. Consolidation methods include applying for a credit card with a lower interest rate or zero percent interest and moving your high-rate balances to the new card. Another option involves getting a low-rate, fixed term personal loan to pay off your credit cards and then repaying the lender; or you can apply for a home equity loan to consolidate your outstanding balances.
Pay More Than Minimum
Increasing minimum payments is another useful tool for paying off credit cards on your own. Creditors ask for a minimum each month, which is usually 2 percent of the card balance. For example, if you owe $2,000 on a credit card, creditors may only request a $40 payment each month. Small payments of this nature do not reduce large balances fast. Aim to pay off balances faster by increasing your monthly payments to creditors. Increase payments to $200 a month and you can pay off a $2,000 debt in about 10 months.
Interest Rate Reduction
In conjunction with increasing monthly payments, talk to your credit card companies about reducing your interest rate. Interest rate reductions help speed the debt elimination process because creditors will use the majority of your payments to pay down the principal, and apply less to the interest. Certain factors such as no late payments and a good credit score (high 600s) helps you negotiate a better rate, and some lenders will reduce your rate on the spot with little hassle.
Control Credit Card Use
Debt elimination efforts are pointless if you can't control credit card usage. Take credit cards out of your wallet and lock them in a safe or drawer. Only carry cash when shopping. If you're unable to keep your hands off credit cards, destroy the cards with scissors or a shredder.
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