Debt is a problem that can spin out of control if it is not taken care of properly. As debt is allowed to grow, a person’s ability to pay it down becomes increasingly diminished because total interest increases, and minimum payments increase.
How Do I Pay My Credit Card Debt
Paying only the minimum payment on credit cards is not an effective strategy for paying off credit card debt, debt can only be eliminated in an efficient manner if a person pays substantially more than the minimum required amount. Paying the minimum merely “services” the debt and keeps credit card accounts out of “default” but generally does not make much of an impact on the principal balances. This is especially true of credit cards with higher interest rates. Paying only the minimum payment on credit cards is NOT an effective strategy to eliminate debt in a reasonable time frame. If you only have the ability to pay the minimum, other debt elimination strategies must be considered.
Evaluating the Best Debt Elimination Strategy
As a debt elimination attorney, people often ask me how do I pay my credit card debt? Well, there is no one answer that’s right for everyone, so I have put together the following formula to help clients make the decision on how to pay off credit card debt:
The Minimums Plus 50% Rule
As we discussed above, paying ONLY the minimum payments will NOT result in a reduction in total debt. Paying only minimum payments will merely “service” the debt and keep you in a “current” status with creditors, total outstanding principal will not be reduced in any meaningful way. The only way to actually make a dent in the principal balances is to pay MORE THAN the minimum payments, 50% more at least. Unless you have the ability to pay at least 50% more than the minimum payments, principal balances will not be reduced in a meaningful way. Paying 50% above the minimums will not pay the debt off quickly, but it will have enough of an impact over time that you’ll see some reduction. At this rate (50% over the minimums), it will still probably take over 2-3 years to pay off the debt completely. Keep in mind, the minimum plus 50% must be paid EACH month to be an effective strategy.
Example: If the total minimum payment on all credit cards is $1,000, to be effective in paying off the debt, you’d need $1,500 each month to be able to see any real reduction in debt.
What to do with Credit Card Debt When You Can’t Pay
If you are like so many people out there, are struggling to scrape together the minimum plus 50%, or are having trouble even paying the minimums, you MUST consider other debt elimination strategies. These strategies typically include discontinuing payment on ALL accounts and either disputing the debt with the credit card company, or filing bankruptcy. Throwing more money at minimum payments each month is not an effective strategy for meaningful debt relief. The important thing to remember is there are options for you. You do not have to be a slave to debt. Minimum payments are designed to keep in indebted forever.
If you find yourself ONLY making minimum payments, this is NOT a strategy that will result in any real reduction in credit card debt, you must consider other options such as debt elimination or bankruptcy. Our attorneys are available to speak with you about these options and put you on the right path to become debt free.