Credit card debt elimination programs – Do you need one?

There are several popular credit card debt elimination programs available for consumers. However, most of these programs will require you to pay a hefty fee. If you really need a group of professionals to manage your debt, sure go ahead and look them up. But if you’re willing to put some time and effort, you may be able to eliminate your debt yourself. Whether you opt for a professional debt elimination program or do it yourself, what’s guaranteed is that it won’t happen overnight. If you want to eliminate your credit card debt, there are basically three options, namely, debt reduction, debt settlement, and credit card consolidation.

Debt reduction, as the term implies, is simply reducing or trimming down your debt. For example, if you owe $20,000, you negotiate with your creditors (possibly through a debt settlement company) to bring down that to $12,000 for example. Yes, this can happen, they will wipe out a portion of your debt to help you pay the balance. It’s not as easy as I made it sound, but it certainly isn’t impossible. Sounds encouraging ha? Indeed, do not give up; you can get rid of your credit card debt. Basically there are two ways how debt reduction works. The first is known as debt avalanche. Say you have credit with 4 credit card companies and their interest rates are 22%, 18%, 11%, and 8.5%. What do you think makes sense to pay off first? The one that charges the highest interest, that is the one with 22%, of course. Because that is the credit card that charges the highest interest on your debt and therefore increases at the highest speed.

Try to pay the minimum payment plus extra payments on the higher ones and just pay the monthly minimum payment on the ones with the lowest interest. This way, the cumulative interest that accrues every month would be minimal. Once the debt with the highest interest is paid off, start paying extra towards the account with the second highest interest rate and so on. A simple thing to do, but not everybody thinks about it.

The other method of ‘debt reduction’ is commonly referred to as the snowball method. This is where you pay off the smaller debts first and focus on the higher debts later. If the smallest debt also happened to be the one with the highest interest rate, that’s great. Then the snowball method and debt avalanche method will overlap with each other perfectly. If the smallest debt is not the one with the highest interest, you may want to think about balance transfer. If possible, transfer the debts with higher interests in to accounts with the lower interests. That way, you’re kind of paying off your ‘higher interest debt’.

As mentioned earlier, you can get the advice of a professional debt elimination program/company or simply follow the simple steps outlined above and take credit card debt elimination to your hands. We will cover debt settlement and credit card debt consolidation on another post.