We are two weeks into 2013, and the majority of us have probably already forgotten or broken our New Year's resolutions. The two most popular resolutions are to lose weight and reduce debt. We can't offer many tips on cutting that waist line, but we can pass on some advice to help you get out of credit card debt. Here are three simple tips to reduce your credit card debt by the start of 2014.
Stop Paying So Much Interest
If you have a $10,000 balance on a credit card with a 20% interest rate and you are just paying the minimum amount each month (about $266), you won't have that credit card paid off until the end of 2041! More alarming is the fact that you will end up paying over $16,000 in interest charges.
If you currently have a balance on your card, start reducing your debt by lowering your interest rate. Of that $266 payment, about $166 is going to pay interest penalties, which leaves only $100 toward your principal. Look at transferring your balance to a card with at least a year at 0% APR on the amount you transfer. You can immediately apply twice as much toward your principal each month.
Pay More Than The Minimum Amount
One of the best ways to reduce your credit card debt is to pay significantly more than the minimum payment each month. In our example above, if you doubled your minimum payment of $266 to $532 each month, your balance would be paid in just three years with just $2,000 in interest penalties.
Make micropayments instead of one monthly payment. As long as you pay the minimum payment by the due date, you can make multiple payments during the billing period. Credit card issuers typically charge interest on a daily basis, so reducing your average daily balance can save you a few dollars in interest. Eat a meal at home and immediately apply the money you saved to your credit card balance.
Stop Charging On Your Credit Card
If you carry a balance on your credit card from one month to the next, stop using that credit card to make everyday purchases. You will pay a high interest penalty on every purchase you make. If you charge meals, entertainment or clothing on your credit card, you could still be paying these off years later, long after the purchases are forgotten. Put away the credit cards and use cash for purchases. Cash is the most immediate, painful form of payment and it will make you think twice about each purchase.
Following these three tips will help you start to dig out of credit card debt in 2013.