The Best Practices for Paying Off Credit Card Debts

It's no secret that credit card debt --- aside from more uncommon debts like payday or hard money loans --- are the most difficult to pay off, because of interest rates and ease of use. The best practices for paying off credit card debts may be subjective depending on whom you consult. However, some great practices, when followed, really work to help pay off your credit card debt.

Information Gathering

To have a well-planned attack, you need to know exactly what you are dealing with. When it comes to credit card debt, this means you have to gather all the necessary information thoroughly. Grab all of your most recent monthly credit card bills and get a copy of your credit report from all three credit bureaus. Then, write down your monthly income from all sources. Be sure to include income from spousal or child support, as well as your income from your job.

Household Budget

No one really likes to make a household budget, but if you want to pay off your credit card debt, you have to have one. Write down your necessary household payments --- for example, mortgage, utilities, necessary medical expenses, insurance payments, car payments and your average grocery bill. Do not include expenses like gym memberships or magazine subscriptions. Although you may like to read that trashy celebrity magazine while putting your time in on the treadmill, those expenses aren't necessary. Subtract your expenses from your income, and that amount is what you have to work with for paying off your credit cards.

Extra Payments

Organize your credit cards, from high-interest to low-interest. The high-interest cards are the ones you want to attack first. The reasoning is simple: high-interest credit cards cost you more money than low-interest ones. You need to allocate as much extra money as you can, while still being able to make your other credit card payments, toward that high interest credit card debt. When you make extra payments, the creditor will apply that amount directly toward your principal balance. If you are concerned that your creditors will behave in a scurrilous manner and not apply the extra payment toward principal and not finance charges, give them a call to make sure they properly apply your payment.

Exponential Payment Increases

Once you pay off one credit card, take the total amount of that payment and apply it to another credit card. For example, if you pay off credit card number one that had a $250 monthly payment, apply that $250 to credit card number two --- in addition to what you are already paying. To take it further, if you pay off credit card number two, take the $250 payment from credit card number one, the payment from credit card two, and apply it to your payment for credit card number three, in addition to your regular payment.