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I am going to make a bold statement but it is a true statement nonetheless. If you ever plan to retire comfortably or at a reasonable age you cannot abuse credit cards. They are financial cancer.

I used to be buried in credit card debt. Part of it was sensible because it helped me purchase books and other things to get me through college, which I financed on my own. However, some of it was just stupidity. Once I decided to make a change in my thought process it only took me 2 years to get out of this debt and I wasnt making lots of money at the time either.

Lets take an example. The average credit card debt is almost $10,000 per household now. Lets say you have a $9000 credit card debt balance and the interest rate is 14.9 % which is low for most people. Depending on the company the minimum payment is probably in the neighborhood of $150/month. If you paid nothing but the minimum payment on that card, and never made another purchase, it would take you 111 months to pay this card off. Almost 10 YEARS to pay off a $9000 credit card debt? That is insanity. It would cost you roughly $16,600 to pay of $9000 in debt.

Lets take a look at the same balance with some different, and probably more common, factors involved. Take a $9000 balance and a 28% interest rate, which happens with just a couple late payments, and you pay the minimum payments only. Someone that only pays the minimum payments will take 1984 months to pay that $9000 balance off. I am not sure about you but I am not going to live 165 years to pay off my credit card debt.

Obviously it wouldnt take you that long to pay it off because your estate would cover it when you died but it speaks to the point of my article. How would you plan to retire comfortably, and certainly not early, if you have this debt as well as other debt hanging over your head?

What many people do not see is that the money you save by not forking it over to the billion dollar banks, that give you the credit cards, can be used much more wisely for you. At my worst I was paying $400 in interest on credit cards. Once I finally paid off my credit cards and stopped using them I found I was easily able to pay cash for the things I would typically put on credit cards. Not only that, I found when I was taking money out of my bank account I was much more careful on what the money was being spent on in the first place.

I decided at age 27 that I wanted to retire comfortably at age 50 and spend my free time with my kids (that I did not have yet) and grandkids. It was worth it to me to sacrifice at a younger age than it would be to deal with my mistakes at age 70. Who really wants to be bagging groceries, at the age of 70, for some high school kids running the register? I know I dont. Clearly, it could happen anyway because of illness or some other circumstance that wipes out my retirement savings but I have no control over those things. I do have control over stupidity though and I wanted to stop it at an early age.

What I am hoping you will take away from this article is how bad credit cards are for you. Credit card companies make billions in profit each year and it is for a reason. Many people feel the insurance companies are the same as credit card companies in that they like to screw people. The difference is, with an insurance company you are at least getting something back for all the money you give them, if you buy the right products of course.

Insurance companies are rich because they take the money you give them in premiums and invest it to make their money. In many cases insurance companies pay out more money on claims for auto and home than they actually take in for premiums. It is hit or miss if they make a profit on earned premiums. (Sorry for the insurance jargon.)

You get no benefit from a credit card company accept for the ability to spend even more money you dont have. Credit cards should be use for emergency purposes only and if you adopt that outlook you will most likely be standing next to me on the golf course in 20 years.

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Interest kills your finances. Especially on credit cards. Did you realize that paying the minimum payment on your credit cards just builds a deeper and deeper hole for you?

I have a wonderful strategy for those of you who have credit card debt on more than one card.

Take out your credit card statements and write down the interest rate and the balance of each. For example, lets say you have three credit cards that have interest/balance as listed.

Card#1 13.9% with a balance of $555.00
Card#2 17.9% with a balance of $486.00
Card#3 19.9% with a balance of $322.00

Note that card #3 carries a higher interest rate than #1 or #2. In fact, Card #3 would cost you more than 40% more in interest dollars over a period of a year if they had the same balance! Do you understand what I am saying here?

The plan to eliminate is easy. Pay the minimum balance due on the lower rate cards (in this case Card#1 and #2) and pay as much as you can afford to pay on Card#3. (For example, you are paying minimum payments of $15.00 on Card#1 and #2 and you can pay $100, $150, $200 whatever you can afford to pay. Make it hurt a little.

Continue paying this way until Card#3 is paid off. Cut it up and throw it away. You dont want a higher interest card do you?

Now, apply the same strategy to Cards#1 and #2. Card#2 is the next highest rate (actually 25% higher in interest than Card#!). Pay the minimum payment on #1 and pay the same payment you were making for Card#3 plus the minimum payment you were making on Card#2. You have already seen you can get by without the minimum payment. Do it!

Continue until Card#2 is paid off. Now, follow the same routine until Card#1 is paid off.

I promise you will feel good about yourself. You will save money that you didnt even realize you were spending before.

If you have followed this far, realize you can do the same thing with your hoousehold loans such as your mortgage and car loans. Many car loans have higher interest rates and can be paid down much quicker in this manner.

Remember, start with the highest interest rates and when your way down. Good luck!

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Best Way To Eliminate Credit Card Debt – 3 Tactics For Lowering Bills

Eliminating credit card debt is a top concern among millions of consumers. However, many people fail to outline a realistic strategy for reducing debts. There are many approaches that will put you on the path toward becoming debt free. Each person must assess his or her own situation and create a plan. Here are three tips to help you become debt free within a few years.

Recognize the Problem and Alter Spending Habits

Before you can take the necessary steps to reduce and eliminate credit card debt, you must first acknowledge excessive spending and resolve to change your lifestyle. Unfortunately, many people choose to live beyond their means. Furthermore, many acquire excessive debts because of trying to keep up with the joneses.

Credit cards serve a valuable purpose. They are great during emergencies and when you are financially strapped. However, if you are charging more than you can afford to pay, this creates a huge problem. As you endeavor to eliminate debts, be determined to stop using credit cards. Do not cancel credit accounts. However, you may consider cutting your cards or storing them away.

Pay Double, or Triple the Minimum Payment

If you are hoping to reduce credit card debts, you must be willing to pay more than the asking minimum payment. In fact, paying only the minimum will make it practically impossible to become debt free. Instead, attempt to double, even triple your monthly payments. If possible, make a large payment toward reducing your balance. This method is most effective.

Obtaining a lump sum of money is challenging. You may choose to use a tax return or bonus money received from work. Getting a part-time job may also provide you with the extra cash. If you own a home, take advantage of your homes equity. Home equity loans or cash-out refinancing generally present homeowners with enough cash to payoff high interest credit cards and other debts.

Use a Debt Management Company

If you need assistance with managing large debts, think about contacting a debt management agency. Trained debt management specialists will review your credit and outline a plan for reducing debts. Furthermore, the company will contact creditors and negotiate a lower interest rate. By doing so, a larger portion of your monthly payments will go toward knocking down the principle balance. Thus, helping you achieve your ultimate goal of eliminating credit card debt.

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Credit card debt is one of the most wide spread financial problems throughout many countries of the world. The convenience of using credit cards, combined with the special offers, discounts and reward systems offered by the credit card companies make this method of paying for goods the number one favorite for hundreds of millions of people. However, irrational spending or simply gradual uncontrolled spending habits can lead to a lot of accumulated debt. Preventing this is essential, as it is much easier to avoid credit card debt problems before they grow strong, instead of battling them when they are already at maximum intensity.

The temptation to use credit cards repeatedly a fact that is also supported by the reward systems and lower monthly payments – will often lead to debt problems. Here are a few tips that will help you use your credit cards more wisely and enable you to prevent the unpleasant situations of having to pay off credit card debts: Set your budget create a framework for a monthly budget, as this will enable you to get a better sense of what your earning and spending balance is. Much notice that they simply can’t stick with the planned budget in this case you should leave your credit card at home when going shopping, and use cash instead. Try to pay as much of the balance for each month. Don’t settle for the minimum payment, as that will gradually develop into credit card debt as you are loosing quite a lot of money to interest rates.

Always remember that your credit card is a cash substitute, nothing more. You can either carry a balance, which comes with a high interest loan or you can make the minimum payments. Although the amount of the minimum payment seems insignificant (it is usually around 3% of the entire balance), this approach will gradually put you in debt. The credit card company accepts such low payments because they get their money back from keeping you in debt for an unlimited period by using high interest rates.

Many studies have been carried out on the psychology of the credit card owner. We tend to spend more than we can afford, own things that are above our financial reality levels and gratify an immediate need with a debt that might take years to pay off. Try to adapt your spending habits to your life style and earnings. If you can’t pay off the balance on a monthly basis, then you are going into a vicious circle of overspending and credit card debt. Don’t use the credit card anymore, until you pay off the outstanding balance. You should also make sure to pay it off on time, as there might be late fees and different other financial penalties that will further complicate your debt problem. Your credit record will also get damaged if your payments are inconsistent and you are often late with them.

Prevent credit card debt by making sure to keep your finances simple. Use only one or two credit cards, if possible. The more cards you have the higher are the chances that you will not be able to pay them off in time. Never pay off one credit card balance with another credit card. If this happens, you need to drastically change your spending habits and come up with a good credit card management plan. Cash advances might sound attractive, but the truth is that they come with higher interest rates and you don’t get a grace period. There are also transaction fees to worry about.

The credit industry is extremely dynamic, and credit card issuers are always trying new ways to convince more people to sign up with their services. Different forms of rewards, life insurances, protection plans or point systems were created to make the credit card plans more attractive. Make sure you don’t let your emotional side dictate when you make a credit card related decision. Getting free gifts or free air miles sounds amazing, but is it really worth it? Try to base your choice on hard facts and a realistic financial plan, not on an advertising created fantasy.

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Over the past two years, the Federal Reserve has raised interest rates substantially. Consequently, credit card annual percentage rates have followed suit. Nearly all credit cards tie their interest rates to the prime rate, which has doubled to 8% from 4% during the string of rate hikes that began in 2004. This has led to interest rates on credit cards rising by 30% or more. Since August of 2006, the Federal Reserve has kept interest rates steady, and many economists believe the next move may be a reduction in rates. However, the rate reductions have yet to begin, and credit card interest rates remain relatively high.

For those who carry balances on their credit cards, high interest rates have resulted in higher monthly bills, with many seeing their minimum payment increase substantially. Fortunately, now, more than in recent years, 0% credit cards offer a safe harbor from high rates. There are two basic types of 0% credit cards: those that offer a 0% rate on balance transfers, and those that offer a 0% on purchases. The best credit cards offer 0% interest on both. How much savings can these credit cards provide? Lets take a look at the math.

Lets assume youre carrying a balance of $10,000. If you simply pay the minimum each month, you will accrue close to $2000 in interest over the course of a year, thanks to daily compounding balances (too bad savings accounts dont pay that type of interest). With a 0% balance transfer, you can expect to save all of that money, plus, youll be given time to pay down that debt. When the 0% period expires, not only is there a chance your interest rate will be lower, but, if rates do not go down, you can always transfer the balance to another 0% credit card. Plus, if you make a minimum payment of $150 a month, your balance at the end of the year will be closer to $8200, rather than $12,000. Thats quite a difference.

Now, if youre fortunate enough to have no credit card debt, a 0% interest rate can be handy tool to avoid interest expenses on new purchases and free up some cash in the short term. Need a new fridge? Have to fix your car? Want granite counters for the kitchen? With a 0% credit card, you can defer the cost of these expenses for a year while taking advantage of high interest rates. How? By placing the cash that would have left your bank account into a high-yield savings account and taking advantage of rewards credit cards.

Lets assume you will make $10,000 of purchases over the next few months. Using a credit card with a 0% interest rate and 1% cashback rewards, coupled with a high-yield savings account with a 4% interest rate can put about $500 extra in your pocket over the course of the year.

Of course, not everyone pays their balance in full each month. With average credit card interest rates in the 12% to 15% range, carrying a monthly balance of only $1000 can cost close to $150 a year. Saving $150 in interest charges may not be a fortune, but its surely enough to buy a nice dinner with a good bottle of wine.

No matter how you use your credit card, a 0% interest credit card can have a positive effect on both short and long term cash flows. Given that the alternative is paying more than 12% in interest, choosing a 0% credit card in this atmosphere of high interest rates is a no-brainer.

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