How Can I Reduce My Credit Card Debt?

…other than not pay your taxes today on your credit card!!

There are tools that can help you determine which bill to pay off and there are many different opinions from industry experts on which card you should pay off first.  Some consumers want to pay off the card with the lowest balance, so they can feel accomplishment in paying off the bill.  Others want to pay off the one with the highest interest rate and others the one with highest balance. I have addressed paying those with the highest interest rate and those with the highest balance.

Pay off those with highest interest rate first

The fastest way to pay off your debt is pay at least the minimums and put any extra toward the cards with the highest interest rates first. Take all of your credit cards, list them on an excel spread sheet, rank by interest rate and then attack the most expensive debt first. You don’t have to use a fancy tool developed by a company to do this. You still have to use the same information in your spread sheet such as the interest rate and balance, as you do for the fancy tool. Either way you have to provide this data, because you are the only one that has this data. When you pay off one card, take that payment and put it toward the next highest interest rate card along with the minimum payment and so on until everything’s paid off.

Pay off account with highest balance to reduce your credit score

If your top goal is to increase your credit score, you may want to take a different approach. Pay off the cards that are closest to their limits first. If you leave balances relatively high to their limit then you are lowering your credit score. The amount you owe contributes 30 percent to your credit score and how much you use of your available credit is included in this.  Having a low score will cost you more in the future in the form of higher interest rates.

You should also call your credit card companies every once in a while and ask them to lower your interest rate. Stay away from for profit companies that offer to negotiate for you. It could cost you even more.

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Credit Monitoring, Credit Report, Credit Score, Debt, Debt Consolidation, Debt Management, Money & Identity

This post was written by John Ulzheimer