One of the key philosophies on personal finance during this recession is debt management. The principle goes – get out of debt as soon as you can. And why not? Interest kills. It’s practically money that you don’t have (or, in some cases, money that you won’t even be earning) down the drain.
We’ve heard all kinds of advice – Keep only one credit card. Don’t carry your credit card with you. Don’t use credit cards for consumables and daily expenses. Don’t accept any increases in credit limits or additional cards. These are all quite valid especially for those who are already struggling to pay off the accumulated debt from credit cards. You need not bury yourself deeper in debt.
Provided that you still have a job that earns you a regular salary, here are some ideas on how to deal with that debt. With the rates they’re charging on outstanding credit, it’s best that you deal with credit card debt immediately.
List down all your outstanding balances from your cards and pinpoint which ones are the largest have the highest interest rates. Figure out a way to pay them off in weekly or monthly payments. Stick to this payment plan. If you can get a loan with minimal interest from some other source (family, friend), consider getting one and pay off your credit card debt – this way the monthly interest won’t kill you.
Once paid, get rid of the credit card. You only need one – keep the one with the lowest fees, rates, and highest credit limit. Use it for emergency purposes only.
