Not all debts are “bad” debts, some debts can be very profitable and healthy e.g. debts taken out for investment purposes, given that the investment for which the debts were taken generate a revenue that is healthy enough to pay itself off and leave you with something in your pocket. It’d be interesting to find out a method that can help you get rid of credit card debt.
On the other hand, most people are saddled with “bad debts” i.e. debts which are non-productive (credit cards, for example) and have grown and evolved to become like a black hole which endlessly siphons money from you leaving you sleepless stressed.
How to Get Rid of Credit Card Debt
Why are credit card debts extremely bad when used the wrong way?
- Credit cards have the highest interest rates amongst all borrowing methodsThis means that the credit card debt will grow extremely fast, to a point where A LOT of people end up barely having enough to pay the premiums back, without even touching the base loan amount.
This is somewhat similar to when you try and keep a car dry whilst it’s raining, or running on a treadmill and expecting to get somewhere, only to find yourself stuck in the same position after long hours of labour! Here is an article that outlines credit card usgae.
For comparison’s sake, a credit card might have an annual interest rate of anywhere between 18 and 25%, a typical mortgage sits at around 3%!
That’s almost 5-8 times more!!
- Credit card debts are usually used to buy stuff you either can’t afford or stuff you don’t need…OR BOTH! It’s great when you can buy something today, and pay for it later…or is it not?
Psychologically speaking, it’s easy to swipe/tap your card at a store or enter those card details onto a website and buy whatever you want because you get this fake feeling that you’re not really paying for it!
This fake sensation makes it easy for you to skip the following key questions:
A. Can I really afford this?
B. Do I really, really need this?
C. Is there a cheaper way?
Once you start buying things you don’t need, with money you don’t own, you’ve started stabbing your own money health…unless you stop doing this, you will kill yourself!
- Credit cards give you a false feeling of security & abundance!
Your credit card limit isn’t money you own…if you for any reason think that this is your money, you’ve been fooled.
You don’t own this money, the same way you don’t own your neighbours car, deal with it as such!
- Credit cards with points and sky miles make you think you’re winning, whilst reality is quite the opposite!
How many times have you seen ads for credit cards where they promise you free flights and various benefits?Again, you get the feeling of “gaining” something, whereas in fact, it’s pretty much a one way stream, it’s all being taken away from YOU – nothing free I’m afraid!
- A loan shark disguised in nice colours and style…is still a loan shark that would want his pound of flesh!
Credit cards need to be paid off, either via installments or in full, they would need to be paid off on time, otherwise fines and fees and interest rates will build up to a level where legal action could be taken against you.Once that happens, all of a sudden this very stylish piece of plastic turns into a loan shark eating your flesh away day in, day out.
How to Get Rid of Credit Card Debt & Be Relived
Here are some practical steps to GET RID of your bad credit card debts:
- STOP using credit cards, and use cash or checking/debit cards insteadIf you’ve got cash in the bank, under your mattress or whatever…start using that and not your credit card whenever possible i.e. use YOUR money for YOUR needs, not anyone else’s.
- Understand how much you owe on each credit card you have, and when the re-payments are dueWhich of your credit cards has grown the fattest? This is usually the one you would need to start off with!
- Establish which of your credit cards have the highest interest rate, and which of them has the highest premium paymentThis one might require that you call your credit card provider up and ask, however, this is a golden bit of information you need to understand.
Keep it simple, the higher the number, the more interest you’d have to pay on the monies you use.
On your credit card statement, there would be a clear line item explaining how much interest or fines are due as part of your monthly payment.
Find out which card has the highest interests and fines payments due, and STOP using it, and prioritize paying it off.
- Do a balance transfer to another card with ZERO interest over a long time period.Shop around for credit card providers that are willing to do a balance transfer for you with a 6 months zero interest payment plan, and transfer the worst of your cards (highest interest rates and premiums) over to this new card.
This will allow you a period of time, sometimes upto a year without any interests and fines – this will PREVENT THE COMPLETE WASTEFUL LOSS of A LOT OF MONEY $$$$ , and most importantly will give you some breathing space to repay the total amount over an extended time period, in fixed increments.
Word of caution – DO NOT USE THE NEW CARD FOR ANYTHING ELSE, and as soon as the credit is transferred and payment schedule for the new card is sorted – CUT UP YOUR OLD CARD AND CANCEL IT.
- Call up your credit providers and make re-payment arrangements
Contact your current credit providers, and try and negotiate a payment schedule with them, with zero or reduced interest.Most credit providers are cooperative towards this approach, if not, remind them that you will have to transfer your credit elsewhere!
- Schedule your credit card payments over a period of time, based on your basic needs and fixed expenses
Whether you got a decent balance transfer or managed to call your credit card provider to arrange a repayment schedule for you, the monthly payments must be within your reach after allowing for other FIXED EXPENSES and NECESSITIES.By Fixed Expenses, we mean rent, bills, and expenses which are recurring and must be paid on time, whilst Necessities refer to your basic needs e.g. food, health insurance etc.
A luxury watch or a designer’s bag does NOT count as a necessity, even though your emotional wellbeing might depend on it.
- Pay your credit cards off in a systematic manner, and take a holistic approach to the recovery process
Our fabolous, smart and easy to use Money Doctor mobile application is designed to help people just like you, for FREE.
The application is designed to diagnose your financial health and help you set up a simple payment plan, with day by day budgeting.
In simple terms, the app will understand how much you owe, and what expenses you have and how much income you’ve got, and create a daily allowance for you.
All you would have to do is key in anything you spend and everything you earn, and the Money Dr will automatically adjust your daily allowances for you to keep you on track to both repay your debts off and get your money health back in order.
Once your Money Health is in order, you can start planning towards bigger things in life, whether it be an investment, a wedding, a home…the application allows you to plan for these too!
Download it now, and start your Money Recovery Journey!