5 Steps on How to Manage Your Credit Card Debt!

To spend has become our habit and nature, especially when we are suddenly handed down with a bunch of cash. However, most of the time, we spend in advance even without the cash in hand. With the introduction of credit card, we all, human beings after all, crave for things to satisfy our desires and lusts. Seeing other people having them, we also want the same thing and experience.

Here's probably an experience you could relate.

Beginning of the month, one fine sunny afternoon, a truck stopped in front of your neighbor house. Of came two men, unloading a big flat box. Out of curiosity, you went out to look what's happening. Out came, your neighbor, smiling happily and greet you. Hey man, what's up? You neighbor replied, "Oh, I have just bought a new 36 inch LCD flat panel TV, come in and have a look". The two men brought in the stuff, unpacked it, and setup it on the living room. Power it up and "Wow", a sleek beauty of thinness of the screen displaying your favorite home movie. You are so intensely and engross with the picture sharpness, clarity and crispness. Best of all, it came in with full-surround mode speaker, and thrill and delighted you even more with the surround sound. You heart keep on telling, "Hey, I got to get one, I ought to have it, I am going to buy it". The next day, you went to the store where your neighbor bought the LCD TV, without even having a thought of it.

So, on the day, the same truck appears now in front of the house, and you got a nice LCD TV, setup in your living room. The picture, the sound, the experience, is indeed overwhelming and the feeling is good.

Come to the end of month, a letter is posted in your letter box. You open it up; $3,500 is printed in the credit card bill. You are shocked, and your mouth is wide open. Oh me gosh, how I am going to pay this?
You got yourself in debt! Out of your Impulse!

Did you know?
In the US, credit card debt has risen over 25% in the past decade with an average balance over US$7,000. Over half of citizens carry a balance every month one in five citizens carries a credit card balance at annualized rate of over 20%. Over 22% of the debts incurred are because of poor debt and credit card management.

Bank of England revealed that Britons owed an outstanding £1 trillion in consumer debt including credit cards and estimated that this debt was rising by £1 million every four minutes.

Here the simple math!
With and outstanding of $1,000 and with minimum monthly charge of 5%, it would take 5 years and eight months to settle the total debt and over and above that, you will be paying $382 in interest based on an annual percentage rates of 18% per annum.

If you are drowned with credit card debts, here are the simple 5 steps to manage your credit card debts!

Step 1
* Understand terms and conditions and charges. This is a very important point. You got to know how much is the Annual Percentage Rates (APRs) for the card you are holding. Some banks may have higher interest rates, or different rates for purchases, cash advances, tiered APRs, penalty and others. A single credit card may have several APRs. One APR for purchases (e.g.14%), cash advances (e.g. 18%) and balance transfers (e.g. 19%) There is also a Tiered APR, which is different rates are applied to different levels of the outstanding balance. For example, 16% on balances of $1-$500 and 17% on balances above $500. A penalty APR is the APR that may increase if you are late in making payments. For example, your card agreement says, "If your payment arrives more than ten days late two times within a six month period, the penalty rate will apply. If you carry over a part of your balance from month to month, even a small difference in the APR can make a big difference in how much you pay over a year. If unsure, ask the bank or agent for clarifications of the terms and condition of the APRs. Be alert to changes in policies and rates.

Step 2
* Prioritize your payments. If you currently have credit card debt, focus on paying off balances on cards carrying the highest interest rates. If you have a 17% APRs credit card, focus to settle the balances, as it will save you a lot of interest. Another way is to transfer the balances to a cheaper interest rate e.g. 8%, but however read the fine print before you do that. You could also negotiate with your current credit card banker to lower the interest, provided you have a good credit rating which means that no late pay notations on your credit report and a good credit score. Otherwise, if the bank do not obliged you to reduced the APRs, just transfer to the cheaper interest rate bank. Make sure you transfer to the credit card that has a low annual percentage rate and be aware of incidental fees and charges.

Step 3
* Limit the number of credit cards. Decline new credit card offers, and cut into half existing cards with paid off balances. In the competitive world, banks are trying to entice consumer with lots of goodies, e.g. free lifetime membership, free gifts upon signing up and etc. No matter what, if you already have one credit card, that is more than good enough. Keep only one, declined other rest, no matter what sort of offer the bank comes out with. Keep in mind, the more cards, the more headaches in trying to keep track of the each card account balances.

Step 4
* If you were forced to use your credit card for an emergency, do attempt to pay off the balance immediately. By paying minimums each month only leads to prolonged and growing debt. If you can't pay full, then you must make attempt to pay more than the minimum.

Step 5
Don't ever... ever... ever... spend beyond your means. Spend within your means. Buy only what you really needs, not the nice to have stuff. Buy what you could afford. Most people will shop for the latest fad cell phone that have touch-screen feature, email function, mp3 players, video player and so on and so forth. However, think about it, what is the main function of the phone: that is to make a call, and probably send some short messaging message. Do you really need all the other gadgets, and do you really need to utilize all the fancy gadgetry stuff the manufacturer pack into the phone. If you really must buy the phone, ask yourself whether you have the budget or money for it. You must also practice delay gratification. Do mind your debt. This sort of credit card debt can be avoided by following one simple rule "If you don't have the money to pay for it, then don't buy it."

Well, that is the 5 simple steps that could indeed be a great help to manage your credit card better.

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