5 Tips to Eliminate Debt Cont.

5 Tips to Eliminate Debt Cont.

4. Don't Close Credit Card Accounts

When you close your credit card accounts, you reduce your options. As long as your current credit card companies aren't charging you any fees for inactivity, it's in your best interest to hang onto your accounts.

The problem with closing accounts is that you're at the mercy of whatever credit cards you decide to keep. That's the equivalent of having to shop at one store no matter how good the prices are elsewhere.

Plus, when credit card companies notice that you're not using them anymore, they'll generally send you an offer that saves you money.

Always keep your options open and be ready to switch banks once you get a better offer.

5. Always Pay On Time

The worst thing you can do is make late payments. If you let the deadline pass, you'll pay interest on the full credit card balance as of the purchase date.

The late fees hurt you immediately and would be better used to reduce your debt. They're also a strike against your credit rating and future bargaining power.

By paying late, you also diminish your chances of getting the best rates and deals on a car loan or a mortgage. In the long run -- especially in the case of a mortgage -- that kind of negligence can cost you thousands of dollars.

Also, in addition to these seven tips, you should also try the following:

First, you need to create a list of all your credit cards, including their balance, interest rate, minimum payment, and last statement payment. Now rearrange that list so that the credit card with the highest interest rate is at the top and the card with the lowest interest rate is at the bottom. High interest rates, especially on cards that you have a high balance on, are your greatest concern.

Second, add up the required minimum payments for all of the cards. Decide how much money you can come up with each month in addition to the money needed to pay off the minimum payments on all cards. It is important that you find ways to put aside more money than needed for just the minimum payments or you will never be able to pay off your debt.

Now, each month pay the minimum balance on each card, but on the card with the highest interest rate pay the minimum balance plus all the extra money that you put aside in the extra step. Continue to do this until the first card (with the highest interest rate) is paid off in full, and then apply this same principle to the next credit card.

Note: it is not a good idea to use one credit card to pay off another credit card's debt!

Also, Call every one of your credit card companies and request a lower interest rate. You may be surprised at how quickly some of them will agree. Lower interest rates mean you can eliminate your credit card debt more quickly without increasing your payments.

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