The average American home carries just under $15,500 in credit card debt, according to the statistics compiled by the Federal Reserve. In fact, as of August 2014, Americans reportedly owe about $872.2 billion in credit card debt. Given these statistics, it’s likely no surprise that credit card debt is one of the main reasons that people end up needing to file for bankruptcy at some point.
If you are among the many people who are struggling to pay off credit card debt, adjusting the way you spend money each month may be critical to helping you figure out ways to:
- Put as much money as possible towards paying down your credit card debt
- Strategically pay down this debt so that you don’t end up paying more than you need to on it.
In this three-part blog, we will discuss a handful of steps that you can take to help you get your finances organized so that you can effectively pay down your credit card debt. If, however, you find yourself too overwhelmed by debt – or you simply don’t have the income to put towards your debt payments, contact Denver Bankruptcy Lawyer Arthur Lindquist-Kleissler to discuss your best options for debt relief.
Here’s What You Can Do to Start Paying Off Your Credit Card Debt…
Step 1 – Put yourself on a strict budget.
While the idea of living on a budget may be stressful or even embarrassing to you, the fact is that having a strict budget will be the best way to:
- Reign in your spending.
- Avoid wasting money on frivolous or unnecessary purchases.
- Make sure you have as much money as possible to put towards paying off your credit card debt.
As you sit down to create a realistic budget, you will need to do the following:
- Total up your monthly income (including from your paychecks and any other earnings you may have).
- Total up your essential monthly costs, including your living expenses and all of your current debt obligations.
- If you have any extra income remaining (this is often referred to as disposable income), consider putting as much of this extra money as possible towards your credit card debt.
Once you have a budget in place, do your best to be financially responsible and stick to your budget.
Step 2 – Figure out the credit card that has the highest interest rate.
If you have more than one credit card (like most people do), it’s likely that each of these cards has its own interest rate. Figure out the interest rate for each card, and plan on putting the most money towards the card with the highest interest rate. The reason for focusing on paying off the card with the highest interest rate first is that it will save you the most money in the long run (as you will be minimizing the amount of time that you are paying the highest interest).
As you sort out which card to put the most money towards first, keep in mind that you should not throw money at one credit card payment if it ends up meaning that you can’t put money towards another payment. In other words, while it’s best to try to pay as much money as possible on the card(s) with the highest interest rate, make sure you are accounting for your other credit card debt payments and paying these on a monthly basis also (as missing even one payment on some cards could cause the interest rates on those cards to jump up a lot).
Don’t miss our ongoing discussion of how to pay off credit card debt – be sure to check out the second and third installments of this blog to come!
Denver Bankruptcy Lawyer at Lindquist-Kleissler & Company, LLC
If you are buried in overwhelming debt or are facing a serious financial crisis, Denver Bankruptcy Lawyer Arthur Lindquist-Kleissler can help you figure out your best options for resolving your financial issues.
For a free 30-minute consult and a free bankruptcy packet, contact us by calling (303) 691-9774, or email us using the form on this page. You will pay nothing up front to obtain trusted, professional advice regarding your case and your options.
From our office in Denver, Arthur Lindquist-Kleissler represents clients throughout the Great Denver Metropolitan area and Colorado, including (but not limited to) Aurora and Arapahoe County.