If you really intend to get free of any debts incurred through your credit card, then you would need to formulate a proper plan and strategy towards achieveing that goal. We find too many people who talk about eliminating debt, but without a proper strategy, they are bound to fail. A plan is something that helps us in focussing on the goal and motivates us to be on track to achieve success in the most effective way.
It is no secret that a debt elimination startegy would often entail cutting back on some of your spendings. So it is highly recommended that you identify spendings that you can cut down on, without exerting too much of a restraint on yourself. If you attempt to get rid of your debts without proper planning, and decide to cut off spending on something that you are unable to cope with, then you would likely become discouraged from the idea and end up incurring more debt than before.
Formulating a debt elimination strategy, and planning the process, will help you make only the sacrifices that matter – without stressing yourself too much. You do this by assessing your current financial situation, income sources, spending habits, needs and wants. Once you identify these things, you can start your journey towards debt elimination with these three basic steps:
1) Stop borrowing and incurring more debt – It is time you identify what your means (income) are, and try to limit your purchases within your means. Understand that everytime you swipe that plastic card – you’re not just buying something, but buying something on borrowed money (often with very high interest rates). Once you realize this, you might finally curtail your expeses and stop giving in to the temptation of swiping the card.
Going for a final shopping spree before ditching your credit cards is the worst thing that you could do. This will only lead to more debt, and extend the timeframes to achieve your goal.
2)A) Try to clear your credit card bill in full, before the due date. This will help you maintain a good standing with your credit card company and also improve your credit score, which in turn, would help you secure credit or loans at a much lower APR when there is an absolute need.
B) If you are unable to clear your credit card dues in full, pay more than the minimum balance on your debt. Although credit companies often require people to pay just a percentage of their debts monthly, it is geared more towards their profits than your convenience. Every penny of your debt that you do not repay before the end of your credit-free period starts accruing interest. So, if you pay lesser, or take longer than your grace period, you end up making money for the credit card company. Since the credit card companies calculate interest even for the interest you’re supposed to pay, it often leads to a long and tiresome process of paying them with ever increaing bills, month after month, just to remain in the good books of the credit company.
If you are able to plan and pay more than the minimum balance, you would gradually reduce the outstanding debt and try to keep a lid on the interest charges, which can otherwise get compounded very quickly.
3) Save wherever you can – This part focuses on identifying any wasteful expenditure that you may be incurring, and curtailing them; and re-investing the money so saved towards clearing off your debts. Doing so would speed up your debt-elimination journey and help you reach your goal much, much faster.