Recently the inability to pay credit card debt has come into focus for a number of people I know. The problem is not that they do not have jobs – some of them have good jobs – but rather the issue is one of timing. This inability to pay credit card debt has come to the fore as a result of the arrival of their credit card bills that relate to purchases they made in the Christmas period.
Up to that point most of these people had been in denial in relation to their credit card debt. Their attitude in relation to their credit cards went something like this. Pay off the minimum amount each month by direct debt and don’t worry about the balance. It was a case of sticking their heads in the sand when it came to how much they owed on their credit cards.
The thing is with credit cards is that if used correctly they can be incredibly useful. They offer huge flexibility. Unfortunately credit cards are open to abuse. When we use credit cards its not as emotionally painful as if we were to hand over a bundle of cash. Credit cards make it easy for us to get into debt in two ways. Firstly they are so user friendly – if you want something you can use your plastic to get it. Secondly you only ever have to pay a minimum balance. In effect this situation allows us to get what we want and pay as little as we want. We can put off paying for things indefinitely once we make that minimum payment each month.
The hidden danger behind all this flexibility is the large interest rates that the credit card companies charge. It’s this large interest rate combine with only meeting the minimum payment amounts that leads to the inability to pay credit card debt.
How to solve the problem.
The reason the people I know got a shock was because of the large jump in the principal amount which was caused by the excessive spending at Christmas along with them paying the minimum amount. As a result they feet like they are on a never ending treadmill of trying to pay off their credit cards but each month the goal moves further and further away. They were looking for a quick fix.
Simply put there is no quick fix to credit card debt. Unless you have liquid assets that you can and are willing to dispose of then you are going to have to look at longer term solutions.
Here is a simple yet effective idea that will work. It is contingent on the total amount of your credit card debt so please bear that in mind.
First off cut up your credit cards and switch to debt cards or better still stop using any form of cards and simply use cash.
Secondly double the amount you are paying off each month on your credit card. Ok so if you are paying off the minimum of say $30 then double it to payoff $60. After a couple of months double this amount again. So once you have become comfortable with the $60 double it to $120. Now obviously you can’t keep on doubling it so once you reach a level where you are finding difficulty with meeting each month make every effort to stay at that level. For some that level may be $50 a month for others it may be $450 a month. The point is that you will need to stretch yourself emotionally by cutting back on the luxuries so that you can meet this new higher repayment level that you have set yourself.
If you are feeling ambitious then once you have reached your peak after doubling the repayment amount a couple of times why not try adding an additional 10% to it each month? You WILL find the money somewhere.
So to sum up. If you have an inability to pay your credit card debt then the two key things you need to do are.
Stop using credit cards and switch to debit cards or preferably cash.
Increase the monthly card repayments that you are making but not only that you need to push yourself to keep increasing those repayments.
Finally it is a case of adding time to this whole equation. Once you stop using your credit cards then the pressure will ease. Ok the interest on the principal will continue to increase but by continually increasing the amount you repay each month you will eventually catch up with it and repay your credit card debt.
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