Bounce Energy Savings

The end of the year has a way about making you think about debt. Not only is it the time when we start evaluating our habits and begin resolving to do better in the new year, but it is also the time when hoards of credit card bills begin rolling in. To our dismay, we see that in just a matter of a few weeks, we’ve managed to undo months of paying down our credit card debts – ensuring that we continue to ride the financial roller-coaster into the next year. So how can you eliminate credit card debt once and for all in 2012? We’ve got some ideas.

Make a Plan

Make time to sit down, formally evaluate your finances, and make an official plan to get out of credit card debt. Start by choosing which credit cards and debt balances you are going to pay down first. There are three ways of deciding which balances to tackle – all of which have benefits and downsides. The most financially logical way of paying off your balances requires that you pay down your highest interest rate credit card first. This will ultimately save you the most money in the long run.

However, if you are the type of person who needs to see fast results in order to stick to your resolutions, perhaps you should take the snowball approach, which recommends paying off the credit card with the lowest balance first. As you pay off a balance, focus your attention to the next lowest balance account and continue the pattern until all debts are eliminated. Another approach involves paying off the debt with the highest minimum payments first. This strategy works well if you are strapped for cash and have little disposable income to help pay down your balances.

Find Additional Income

Chances are, that if you have a lot of credit card debt, you probably also have little disposable income each month. Unfortunately, it is that disposable income that is key to helping pay down your credit card balances faster. Consider asking your boss for a raise, or perhaps take on a weekend job. If you cannot generate a side income, consider selling used goods in your attic, basement or garage. After all, one man’s trash is another man’s treasure, and you may be surprised at how much cash is sitting in your storage. Use the additional cash to pay off your credit card debt.

Stop Spending

All of your hard work will be for not if you fail to stop your credit spending habits. Try to purchase everything you need using cash, your checking account, or in some cases, your savings account. By purchasing only with the liquid money you have on hand, you are forced to remain within your budget, as well as your means. Also, by closely monitoring your funds you will quickly realize how much the little things add up; like morning coffee, meals, snacks at the gas station. Cutting back on these little things can make a big difference on your monthly credit card bill and you may be amazed by how much more disposable income you can have. Don’t fall into the trap that other consumers do; they use a credit card all of their purchases to score airline miles, points and cash, only to find they do not have enough to pay off the entire balance of their purchases each month. That’s called living outside your means, and it is a sure-fire way to increase your debt load.

Improve Your Credit Rating

This is one of the most overlooked keys to paying off credit card debt, but also one of the most important. By improving your credit rating, your credit card companies may lower your variable interest rates, which means you’ll have more cash to put toward the principle balance of your debts each month. Furthermore, a good credit rating could qualify you for a low-interest rate consolidation loan to combine your credit card balances into a single debt financed at a lower rate.

To improve your credit rating, make all of your payments on-time, every time. Also, note that the amount of your revolving debt-to-credit ratio will affect your credit score. Utilizing more than 90 percent of your available credit can significantly lower your credit rating. Similarly, using more than 70 percent can place a ding in your rating. Ideally, you would keep your revolving credit card balances at less than 30 percent of your available credit in order to achieve a better credit rating.