Over the last two years as a university student, I'd spent a lot of time in credit card debt. As a student in Singapore, I made a mistake of getting a secured credit card from a bank, by putting down $10,000 as collateral in a fixed deposit account. That $10,000 was my hard earned money from a 3 months long web development project I worked day and night for. Yes, what an enormous stupidity!
As a first time credit card user, I went berserk. The first thing I got myself was a Dell Studio XPS at installment of $110 a month over 12 months. It was a necessary purchase though, since my old laptop was busted just a week before. After that, my charges were hiking up, all with parties, new suits and whatnot. The moment I realized what I was doing, I was already deep in debt. My collateral money was in danger. I panicked, naturally. But not for long. I began to search for ways to get out of my credit card debt. The following is a consolidation of tips I gathered throughout the time, some I followed and some I couldn't due to different situations but still very good tips.
Divide minimum payments in half and pay it twice. Yes, you heard that right. I actually followed this advice exactly. It actually helped me in two things. First, it's easier to shell out half amount of minimum payment at every two weeks. Even saving for half payment is much easier to do than to save for whole month. Temptation to spend was too strong for me. Another benefit this method brings is lower finance charges. Credit card interest is calculated based on the average daily balance for the entire month. So when I paid every couple of weeks, I reduced the average balance and thus the interest.
Pay whatever amount whenever you can. Micro payments are another helpful way to pay off credit card debt too. Apart from my routine repayment at every two weeks, I paid off the debt whenever I had extra money to spend in my account. It doesn't matter how small it is, even $20 will help. Any earnings from eBay sales, part time work or gigs can go directly to the credit card. Yes, it's not much but they add up. I am a freelancer in writing and design. So at that point of time, I paid a lot of micro payments for my credit card debt.
Get a part-time job. This advice seems to be commonly given but more often than not, it is a viable option to generate extra cash flow over regular monthly income. I was a student and working as a freelancer, so I just worked extra hard to get more clients and repeat business. But opting for part-time job may be a bit safer option for most people not used to freelancing, since it guarantees a regular pay. If you have a family or very busy schedule with studies or full time work, then this should only be used as a last resort to quickly pay off credit card debts. It is not a good idea to harm your health since healthcare costs are really expensive.
Stop using the cards. This one really seems like a common sense but unfortunately for most people, they fail to do so with any conviction. If you don't want to sink deeper, stop digging. If you must put the cards frozen under a huge ice box so that you can't reach them, please do so. Whatever you have to do, make sure that no new charges are made on any of the credit cards. I made a mistake of keep using my credit card even when my debt was already at $8,000+. It was not helping in any way at all!
Pay debts off to smallest first. This advice is mostly for people with multiple credit card debts. I only had one credit card so I didn't have to follow this one. But it makes perfect sense. According to one financial magazine, pay everything you can at the smallest amount while making only minimum payments on all other cards. It is not a trick to reduce interest rate or anything but a motivational factor. The psychological advantage is that if you manage to bring down one or two debts down to zero, then you will be more motivated in paying off the rest. The feeling will be thrilling and liberating. I know it is, because that's how I felt when I finally paid off all my debts on one card.
Above tips are mostly tried and true advice, some from financial experts and a few are based on common sense. Following them should make you progress towards liberation from your credit card debts. However, it is imperative that you don't get depress and stress out for being in debt. It won't help. Instead, motivate yourself to get out of debt as fast as possible. To do this you might have to make some necessary sacrifices on other financial goals for a period of time.
But as long as you keep repaying and not putting on anymore charges to your cards, you will soon find yourself free of credit card debt. Start a debt snowball plan now and free yourself. Now is fleeting, later is eternal.
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