If you are living within your means but are carrying old credit card debt, with interest rates at a low of 38 per cent charged on the original debt, not the balance you owe, old debt is very, very expensive debt.
A recent article published by the Jamaican Observer gives plenty of tips to help reduce debt.
1. Call a halt to new charges.
The smartest money-management move you can make is also the simplest: to reduce old debt quickly, avoid incurring new debt. Once your credit card debt is paid off, resolve to pay off all new credit card charges in full when the bill comes.
2. Set a realistic goal.
Your main goal may be to get out of debt entirely, but depending on your debt level, that may be too overwhelming to accomplish right away. To keep up your incentive, try setting smaller, more immediate goals that you can celebrate as you reach them. Paying off one credit card is a good example. When you've reduced your debt to the goal you've set, you can use the extra money you'll have each month to reach other goals.
3. Prune your plastic
Though it's rarely a good idea to carry more than two credit cards, most people own a bundle. This increases the potential for fees and penalties, makes it difficult to keep track of balances, and of course adds even more impulse-buying firepower to your wallet. Caution: Don't just stick your unwanted cards in a drawer and stop using them! The account remains open until you tell the company to cancel.
4. Prioritize your debt payments.
Make up a spending plan that will include payments to cover the minimum amounts on all your loans and credit cards. Develop a strategy for reducing your debts as quickly as possible. You can do this in one of two ways:
*Pay off the debts with the smallest balances first. Putting a little extra money toward the smaller-balance bills gives you a psychological boost, as those debts are more quickly eliminated.
*Pay off high-rate cards first. This method saves you the most in the long run. That's because those high-interest cards eat up most of your monthly payments in finance charges, instead of going toward paying off your bills. Once you've paid off the most expensive bills, more money is freed up to pay other bills--what's known as the the "debt snowball" effect.