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[H814]How Pay Off Credit Card Debt

by Amber Knutson, Amb

Not a happy picture but as bleak as that sounds running won't change it but knowledge may and so, let's take a quick snapshot at a few of the current credit card debt statistics facing so many Americans today.

The American Consumer spends over 1 trillion (that's a 1 with 12 zeros) per year on credit card purchases. Not a big deal in and of itself but the problem lies in that they end up carrying over and paying interest on about half that amount or $500 billion. This translates into a balance of between $5,000 and $8,000 per family, with about $1,000 per year going just to pay the interest.

That's just the average - many people owe much, much more!

Excessive Debt Costs Everyone Money
Many American receive at least one new credit card offer in the mail every day. The money being spent to service the debt industry is truly immense. Billions are spent administering, calculating and marketing the various aspects of the credit card industry.

Few industries or people escape unscathed, at least in the long run by debt. The burden that bankruptcy puts on the court system or the cost to government of providing subsidized debt counseling, are just a few examples of how debt effects the nation. In addition, consumers with excessive debt have less to spend and when money isn't flowing, it hurts the economy.

Whatever Happened to Saving?
Debt is becoming increasingly more common. Not long ago, even a little debt was considered to be absolutely unacceptable. When you wanted something, you saved up for it and bought it ONLY after you had enough money to actually pay for it. And, if you had less than perfect credit, you couldn't even get a credit card. Look at consumer debt figures as little as 50 years ago and they were absurdly low - the way most of the non-Western world is today.

The reasons are many and everyone has an opinion but regardless of the reasons, the art of saving, at least in the "western world" seems to have been lost. Outside of a 401K or similar vehicle offered at your place of employment, virtually nobody is saving enough for retirement. Banks are starting to have to offer ever-higher interest rates to get people to put money anywhere near a savings account. In fact, few people even have a savings account anymore. Most people have a checking account and that's it. Our society and progressed into a "now" culture and the virtues of patience that help grow this country seem to have been lost. Whatever it takes to live life in the present with little regard for the future, appears to be the prevailing sentiment.

Is Over Spending the Culprit?
Ok, I've been a bit harsh up until now but I don't want to give the impression that the only reason you're in debt is because you continuously and frivolously overspend. Other factors are involved.

Truth be told, many people get buried in debt because of the loss of a job or an illness and they use credit cards to pay for basic expenses. As a result, they fall into the downward interest trap spiral as their debt grows out of control from just a few thousand dollars initially borrowed to pay for essentials.

Most people do have a reasonable sense of what they can afford and they don't just go out and use credit cards to buy any and everything. Getting heavily into debt is usually a combination of many factors but the problem lies in people leaving balances on their credit cards for too long and not realizing just how deadly compounding interest really is to their financial well-being.

than one merchant was issued in 1950. Frank McNamara started the ?Diner's Club? credit card company with about 200 card holders, and it was also the start of the vicious cycle many credit card users fall victim to: charging purchases when you cannot afford them, and then struggling to keep up with the monthly payments because of high interest rates and spending outside of your means.

The average credit card debt held by the typical American is over $8700. As any credit card holder knows, the interest on a credit card causes you to pay

more than double the amount you've spent on the card, if you only send the minimum payment and never make any late payments. That number increases when you are late sending payments, thanks to the addition of ?late fees?.

Some people attempt to play ?credit roulette? to pay down their credit. This is a game where you take out a loan to pay off a credit card, or you transfer credit card debt from one card to another, hoping to take advantage of a lower interest rate or promotional offer. While this will work for awhile, eventually you will have difficulty getting new offers and places to transfer the debt to, or you'll miss the fine print on one of the offers and end up paying more interest than you thought, defeating the purpose of the balance transfer.

So how can the average individual pay off their credit card debt without bankruptcy, without joining a credit counseling service (some credit counseling services are very helpful, but beware of others who charge high fees to combine your credit card debt and end up costing you more money than you would have paid on your own!) and without having to get second and third jobs?

One of the best techniques for paying off credit card debt (and other debts as well, for that matter) is the snowball technique. In the same way that a snowball gathers more snow and grows as it rolls down a hill, your payments to your creditors will grow as you pay off one debt and then apply that payment to your next creditor.

Make a list of each of your creditors, including their minimum monthly payment, the total amount owed, and the interest rate you are being charged. The debt that has the least amount owed will be the first creditor you will concentrate on paying off. You'll pay the minimum amount owed on each of your accounts except for that one, sending as much as you can to this creditor to pay it off.

For example, let's say you have three credit cards. Credit card one has $8,000 owed at 20% interest, and a minimum monthly payment of $80, credit card two has $6,000 owed at 18% interest and a minimum monthly payment of $45, and credit card three has $2500 owed at 21% interest with a minimum monthly payment of $30. You're going to send minimum payments to credit card's one and two, and send as much as you can afford to credit card three, until it is completely paid off. Let's say you can afford to send $100 to credit card three. Once you've paid the account off, write the company and cancel the account. This removes it as ?available credit? on your credit report and helps your credit score. So now you have an additional $100 a month. You'll now concentrate on credit card two, which is now your lowest debt, now slightly less than $5,000. The payment you'll send to credit card two will be $145, since you had already been sending the minimum amount of $45, and you're adding the payment from the first card that you paid off. The snowball has gathered more snow! Now, once you've paid off your second credit card, you will have an additional $145 per month to send to your last credit card, to which you had already been sending $80. The new payment to credit card one is $225 per month- almost three times the minimum amount due.

Using the snowball technique is not an overnight solution, but you most likely didn't obtain all of this debt in one night, either! It is an easy method to apply, and will get you out of debt much faster and at less interest than if you just sent the minimum to each card every month, and works much more effectively than trying to send an additional few dollars to each account every month.

Article Source : Visa Student Credit Cards

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Both Amber Knutson & Ravencredit are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Amber Knutson has sinced written about articles on various topics from Credit Cards. Amber Knutson is a contributing writer to: and