Daily Web Money

Your Two Best Options to Reduce Your Credit Card Debt

The first option of the pay down system is really quite simple in my opinion.  Figure out which credit card is the ‘worst offender’ by picking the card with the highest interest rate, and the highest balance due.   Whatever extra you can pay on this card each month should automatically come off of the balance, which in turn will pay the balance down faster so that you will have that amount less each month for them to assess their finance charges on.  This will ultimately pay the card down faster, and once that card is paid off, then you can take the amount that you were paying on it, and apply that amount as extra on the payment to the next worst card. 

So, for instance, if you were paying $260 a month on the first card, and you paid it off, then you have another card which has a minimum payment of $200 a month.  You add the $260 a month from the card you just paid off to the minimum payment of the second card, making a total payment of $460 a month on the second card.  This will pay the second card down in roughly half the time it would have taken making only the minimum payments.  You keep doing this until all of the cards are paid off, passing the payment from the last ones on to the next card.  If you started out paying $800 a month for 5 cards, then by the time you started paying extra on the last card, you would be putting the full $800 on it’s monthly payment, and would possibly pay it off in a couple of months depending on the total balance.

The second option is not for someone trying to keep their credit score in good standing, and you will need to have about half of the cash on hand that you owe.  This method can cause negative effects on your credit score because you are essentially skipping out on paying the entire amount you borrowed back to the company that loaned it to you.  There are reputable credit service agencies that can help you with this method if you don’t feel confident enough to do it yourself.  Basically, you just call the credit card company and make them an offer of what you can pay it off for, and a lot of times the company will write off the amount left over, and report it as a ‘write off’ on your credit report. 

For example, if you owe $10,000 on a credit card, and you have $5000 in your pocket, you could make the company an offer of $4000 and they may or may not take the offer.  In some cases, they may try to bargain with you to try to get more out of you, but they can also take the offer just to get out from under your obligations, especially if you have a bad history of not making payments, or are several payments behind.  They would rather not have to deal with you in the future than wait around for you to make more payments.  Keep in mind, this does not always work, but it is worth the try.

There are also other things that can be done to make paying back credit cards easier.  You could for instance, request them to lock your account, and to assess no more finance charges and set a fixed monthly minimum payment.  This method usually means that you can no longer charge anything to the card, and all you are doing is simply paying off a loan.

In some cases, you can call the credit card company and request that they lower your interest rate because you have a better offer from another company, and they will sometimes comply.  This is not a guaranteed method, and differs from company to company.