Before you start on a campaign to reduce credit card debt, you should first ask yourself why you’re trying to reduce your credit card debt.
Are you trying to bump up your FICO Credit score, or merely to increase your cash flow?
If you want to reduce credit card debt to increase your cash flow then it makes sense to start paying off the highest interest credit cards first, while only making minimum payments on whatever other credit cards you might have.
So let’s say you have a Discover card with a Balance of $2.000.00 owed, at 16% interest, and 3 other cards from department stores at 32% interest, all with $500.00 maxx-ed out balances.
Play the numbers games here and pay down and pay off the highest interest cards one at a time, but makes sure you focus on one card at a time, so if you have a total of 4 credit cards whose balances, AKA debt you want to reduce (for increased cash flow purposes) then put all of the lower interest cards on a minimal balance payment plan, and focus on one card at a time.
Once you have one card paid off, cut it up but don’t deactivate the card, since that would affect your credit rating by lowering the amount of credit available to you. Just cut it up and never use it again.
Do this repeatedly, until you’ve tackled and conquered all your highest interest credit cards first, then work on the biggest credit card debts/balances next. I also recommend as part of your debt management plan or credit card debt reduction plan, to ensure you’re making payments on time, all the time so you can ask your credit card companies for an interest rate reduction.
I recommend that you work hard at making sure your credit card payments are on time, otherwise your interest rates with go up, but the other side of this coin is, the credit card companies will reward good behavior (ie,. timely payments ) with a consideration of reducing your interest rate.
You can reduce credit card debt in a lot of ways, and the tips above are practical and effective, especially if you’re trying to increase the amount of cash flow you have.
Final note: If/when you follow these steps to reduce credit card debt and increase your cash flow, put that extra saved/earned money into paying down other credit cards. I call this the reverse exponential interest debt management plan!