How do you handle credit card debt? Do you pay it down or pay it off? Do you pay the minimum and let the interest accrue?
Since the credit card companies have lowered the credit limit and increased the interest rates, it makes the higher payments more difficult to pay. And with the lower limits this also lowers the credit score. Now it looks like you have more debt. It does not matter that you only had a small balance, that you paid on time or made extra payments.
The temptation is to pay down the credit card so the balance is less. I know some people who have taken money out of their home, used money from their retirement funds or savings to pay off their credit cards.
The problem with paying down the credit cards is that you are out of that money. I do not like having credit card debts however when the credit card companies are making these drastic changes, another solution is needed.
What do you do then with the credit card debt?
It is better to pay the minimum monthly payment vs paying it off. The reason for this is because when you pay off the credit card your credit limit is lowered and then it could be next to nothing. Follow the debt elimination plan, monitor your spending and work on making more money.
So this is what I learned from Loral’s book and CD
Here is a chart and calculation to use that can help you determine which credit card to pay off first. This was obtained in the workbook “Building Your Wealth Cycles”
Step 1. First fill in the form for each of your credit card.
Step 2. Divide the total amount of the debt by the minimum payment for each card to get a factoring number.
Step 3. List the card/loan with the lowest factor number as priority one then make a list of the 2nd lowest factor number, and 3rd lowest, etc.
Step 4. Pay up to $200 or more than the minimum to the card to accelerate your debt elimination plan. See where you can cut some expenses to allocate to this extra payment.
Step 5. When you finish paying off the first card in the number one spot, take the amount you were paying on the number one debt and add it to the minimum payment of the 2nd card with the 2nd lowest factoring number. Keep doing this until you totally eliminate all of your bad debt.
Name of Debt: ______________
Total Amount: ______________
Minimum payment: __________
Interest Rate: _______________
Factoring # _________________
Priority Name of Debt Factoring Minimum
Order of Number Payment
Payoff
1. _______________ _______ ______
2. _______________ _______ ______
3. _______________ _______ ______
As time passes after that card is paid off, then use the payments you made to that card to add to the payments of the next highest interest rate and card balance. Keep doing this until all your cards are paid off. This will accelerate your payment and debt relief. Then don’t keep using the credit card to make more purchases that you are not able to pay.
Create another bill called “savings” Or “wealth account”. Every month make sure to pay yourself first. You will be surprised what you can accumulate over time.
Hope this helps
Amy Yoshimitsu
Lois Threlkeld
www.NationwidePropertySellers.com
www.LoisBuysHouses.com
Investing in Your Future
