How to pay down your credit card debt

With the sagging economy in the U.S. many people are starting to rethink their credit card strategy or their lack of one. It could take you on average between 25 to 30 years to pay off your credit card debt, depending upon the amount financed and your interest rate. This is not a good way to manage your finances.

You can infer from the announcement made by American Express that it is offering 300 dollars to a percentage of its card holders to pay off their accounts and close their AMEX account. This caught a lot of people off guard and many people starting asking what was the deal. AMEx has not really disclosed how many people are being offered this deal, but the compnay is apparently doing this in an attempt to lower its risk. The announcement by American Express sent something home. Credit card is not good debt to have. Unless you pay off your balance every month you are going in the hole every month and it would be a good idea for your finances to try and pay down your credit card debt.

One way to start developing a plan is to make a list of all of your credit cards (including all consumer debt such as doctor bills, furniture stores and your home).

List the following in columns: the type of credit card, principle amount, regular payment amount, power down payment, interest rate, total number of payments left on the card, estimated payoff date. Put your list in order of how many payments are left from least to most. If you make a minimum payment of $55/month on one of your cards until it is paid off in full, you then have $55/month freed up to add to the minimum monthly payment for the next credit card. After you pay off the second card, the amount you were paying on that one can be applied toward the third card. By doing this, you will decrease the number of years required to pay off your credit cards from approximately 30 years to nine years.

Using this strategy, think about the other ways you can free up money. If you spend about $100 at Starbucks each month, think about spending that money toward your credit card payments.

Remember, money is emotional. We spend and make money based on emotional compulsion. Go back and see what you spent money on in the last week and how much you spent. It’s not how much money you make that matters, but how much you manage to keep. If we all start to reduce our debt, then not only will we help the economy we will also help ourselves.

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