Pack away your debts with the payment push By
Bankrate.com
Want to know what the big moneymaker is for credit
card companies?
Fees (read: your money). Last year, 31 percent of
the industry's profits came in the form of late-payment fees, over-limit
fees and the like.
If you are like the average American family, your
total credit card debt is around $8,100. If you were to stop charging
altogether and pay only the minimum amount due on this amount, it
would take about 30 years to get rid of it.
No one wants to hand over cash to the credit card
companies, but by paying only the minimums or falling behind a couple
of months here and there, you are lining their pockets with profit
and limiting your opportunities for enjoying life.
Bankrate.com to the rescue. Use the "Payment
push plan" to methodically dissolve your debts. Here's how
it works.
1. No
new debt
Put away the credit cards; borrowing is no longer
an option. Even when you know you deserve something, you can't have
it until you can afford to pay cash for it.
2. It's a head
game
A daily affirmation helps to program your mind
for success; post this on your bathroom mirror: "By living
frugally, we will have the cash necessary to pay off our debts in
___ months instead of ___. The $______ we save in interest will
be put into savings so we will always have enough to pay the rent
and weather any lean periods in the future."
Check out this calculator
to determine how quickly you can be debt-free and how much you'll
save in interest fees. Use the facts to write your bathroom-mirror
mantra.
3. Prepare a
debt repayment schedule
Use our debt
repayment worksheet. Include columns for the name of the debt,
balance due, interest rate, current payment and "Payment Push"
period.
Rank the debts by interest rate, with the highest
one on top. Add a line under each debt to describe how you're going
to fund the "Payment Push."
The "Payment Push" gets applied to one debt
at a time: Continue to make the same monthly payments on all debts
except the one getting the "Payment Push."
If you'd like a worksheet prepared for you, check
out our Debt
Adviser calculator.
4. Start at
the top
Apply the "Payment Push" strategy to
the debt on the top of the list: All extra, available cash is used
to pay down the debt with the highest interest rate, first. That
includes raises, bonuses, belt-tightening and that $20 bill that
unexpectedly popped up.
Push hard at the rest of them. When the first
debt is paid off, use the cash that is freed up to pay down the
next debt on the list.
Be on the lookout for new ways to cut costs
and bring in more money. The sooner a debt gets paid off, the sooner
you can push hard at the next one on the list.
(Looking for some cost-cutting strategies? Check
out these great
tips for living frugal while still enjoying life.)
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