The Best Credit Card Debt Reduction

Reducing credit card debt can be very challenging. However, the end results are well worth the effort. Lowering credit card debt can increase your credit score; and with fewer debt obligations, you can begin building a financial cushion and focus on long-term savings.

Speak with Creditors

You don't have to accept the interest rate assigned by your credit card companies. A good credit and payment history with your creditors can justify better interest rates. Call your company's customer service line and simply ask for a lower interest rate. After a quick review of your standing with the company, some credit card companies will reduce your interest rate on the spot with no hassle. Paying a reduced interest rate helps reduce the principal on credit cards faster, which speeds debt reduction.

Decrease Spending

Rein in spending to increase your monthly savings. Depending on how much you spend on extras each month, this may call for a major lifestyle change. Dining out, shopping and excessive recreation can take a chunk of your income. Evaluate your spending and drastically cut back to increase your disposable income.

Put Savings Toward Debt

After reducing spending and saving more, use the savings to increase monthly debt payments. If you once paid $20 a month towards a credit card bill, increase payments to $40, $60 or $100 to get rid of the balance sooner. Higher payments pay off the new interest charges, plus a larger percentage of the principal debt.

Credit Card Use

If you don't plan on paying off your balances in full each month, or if you can't afford to pay off entire balances, don't use credit cards. Carrying credit card balances from month-to-month keeps the debt cycle going, and you're less likely to reduce your balances. It's counterproductive to make a $100 monthly payment, and then re-charge $100 or more each month.

Debt Consolidation

Combine your outstanding credit card balances into one bill to save on interest and ultimately pay off the balance sooner. Methods of debt consolidation include applying for a home equity loan, using collateral to secure a personal loan or transferring your high-rate balances to a credit card with a lower interest rate.