Battling the Bulge: A Simple Plan for Reducing Credit Card Debt ...

September 5th, 2012

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**Welcome to Self-Improvement Month here on the Credit Karma Blog! Today?s guest post is contributed by Money Crashers.**

With an economy that?s been down for the better part of a decade and a job market painfully slow to rebound, millions of Americans are struggling to keep their heads above water. One way for many to maintain their lifestyle has been relying on credit cards as their savings dwindle, leading to the sticky situations of bulging balances and expanding interest rates.

It seems like every other commercial on TV or radio is geared toward addressing the credit crisis, but all it takes is an earnest desire and simple plan to live debt free. Here are some steps to get you started.

1. Assess the Big Picture

The prospect of looking at your finances when you are in credit card debt is about as inviting as staring at the sun. But the only way you can deal with your debt is to make a realistic assessment of the situation. Review all of your credit card statements, recording for each the amount you owe, annual interest rate, and minimum monthly payment and fees. This will provide you with an accurate assessment of what you are up against.

2. Prepare for Battle

At this stage, it?s important to do everything in your power to arrange for the lowest interest on the debt you?ve accumulated. Each percentage point counts, so investigate every option in terms of lowering your rates or consolidating accounts. Contact your current provider to see if you can negotiate a friendlier agreement, and look into low interest credit cards that offer incentives and introductory offers.

Just be sure to read the fine print on extra fees and clauses that could actually hurt you in the long run. For example, if you move a large balance to a card that temporarily waives interest on transfers, take note of the balance transfer fee and realistically determine if you can get it paid off before a much higher interest rate kicks in.

3. Prioritize Your Cards

Once you?ve done all you can to get the lowest interest rates, rank each account by the total amount you owe and the monthly penalty. While you are going to be meeting each of your minimums going forward, the plan is to divert all additional resources toward paying off the card that represents the biggest cost each period. In this manner, you will be keeping all of your balances in check while focusing your efforts on chipping away at the iceberg from its top.

4. Budget Beyond Minimum Monthly Payments

While performing your calculations, be sure to figure the total amount you owe on all of your cards for minimum monthly payments. With that number in mind, you need to reign in your budget to provide enough funds to meet these minimums, plus excess every month to pay down the highest balance. If it means packing a bag lunch, making your own coffee every morning, or taking public transportation, this is where the true battle of the bulge begins. Whether you can manage $200 one payment period and just $50 the next, keep fighting every month. Eventually you will win the war.

5. Keep Your Eyes on the Prize

Now that you have things under control and are steadily paying down your debt, you need to stay focused, set goals, and reappraise your situation at least every six months. Keep close tabs on your fees and minimums, continue to look for opportunities to lower rates, and stop to celebrate your successes.

Chances are you didn?t land in debt overnight, so accept the fact that it will take time to reach the finish line. Don?t worry ? life is not a sprint, but a long-distance marathon, so find your stride and never look back.

6. Drive to the Finish

Most people only need one or two major credit cards, so as you get your balances under control, stop using excess accounts. Think twice about closing your credit cards, however, as this can negatively impact your credit score.

In time, your monthly payments and fees will dramatically decrease, allowing you to devote even more money above the minimum to pay down the remaining balances. The prospect of additional expendable income, improved credit ratings, and reduced stress should be all the incentive you need to stay the course.

Final Thoughts

Carrying credit card debt not only puts a strain on your financial capabilities, but also imparts a level of duress that can sap the joy right out of life. Clearly assessing your financial situation and following a plan to pay down your debt is your one-way ticket to financial freedom. Now that you are finally going in the right direction, avoid making it a round trip by adhering to a budget and staying committed to responsible spending.

What other tips can you suggest to reduce credit card debt?

Brian Spero is a financial writer for Money Crashers Personal Finance. He covers important money topics related to credit cards, smart spending and retirement planning.

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Source: http://blog.creditkarma.com/debt/battling-the-bulge-a-simple-plan-for-reducing-credit-card-debt/

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