Credit Card Payments 2

Credit Card Payments
Tips for Paying Double Easily

How do you pay off your new, higher credit card balance?

Stop Charging

Yes, you will have to make major sacrifices to stop using your credit card. But just look at all the money you'll have in ten or thirty years that you wouldn't have if you had to pay all that credit card interest. If you have trouble resisting the temptation to charge, here are some solutions that have actually worked:

* Give your credit cards to a friend or family member to hold in safe keeping.
* Freeze the cards in a block of ice.
* Never carry more than one credit card with you.

Economize on the Small Things

According to Michael Peterson of the American Credit Foundation, even tiny savings really add up when it comes to debt. His favorite example is the Diet Coke example:

* If you buy one Diet Coke a day at $1/day, that's $365/year.

* If you instead invested that one dollar a day at 10% interest (the average yearly return on major stocks over the last half century), you would be a millionaire within 56 years.

* Of course, with credit cards, this logic works in reverse: if you are lucky enough to be paying only 10% interest, fifty years of charging Diet Coke to your credit card will mean you've lost the same amount, not only in interest paid, but in the lost opportunity to save and invest.

* You don't have to put aside one dollar a day for fifty years to see a big difference. One dollar a day is $30/month, 15% of the average $200 increase in credit card minimum monthly payments.

* In order to get that entire $200 increase out of your daily budget, you would only have to save $200/30 or less than $7 a day. OK, maybe you aren't drinking seven Diet Cokes a day. But there are very few credit-card-holding Americans who can't cut $7 a day out of their spending.

* Saving weekly rather than daily, $200/month works out to about $45/week, or the cost of a restaurant meal for a small family--another luxury you might want to skip until you're debt-free.

Bigger Savings

* Taxes. Most Americans could pay hundreds of dollars less tax each year if they just took all the deductions they were eligible for upfront, rather than waiting to get a refund in April. By April, you will have spent a big chunk of money on interest on debt that you wouldn't have spent if you'd had the money at hand.

* Pleading. Call the credit card companies and ask if they can allow you to set up a payment plan, or at least provide a brief extension. Simply calling and letting them know you haven't forgotten about them can help keep you out of the worst trouble.

* Credit counseling. Credit counselors can talk with credit card issuers to help you get a repayment plan you can keep up with. They can also open your eyes to untapped sources of income you never knew you had, like kicking the $1,000,000 Diet Coke habit.

In short, don't panic. With only a little bit of planning, you can make the higher minimum monthly payment work to your advantage, just as the policy's authors intended.