Is Management of Your Credit Card Debt Driving You Crazy?

A Credit Article Contributed by Mark Mcclelland

This is Why Management of Your Credit Card Debt is of Paramount Importance

The typical American family's inability to put a proper plan in place for management of their credit card debt has placed an average debt of about $7,000 over their heads. And at a very typical 18% interest, that's just over $105 a month in interest charges. And your average credit card issuer, being the understanding institutions that they are, are likely to jump that up to 27% or so if you make a single late payment, whacking you with an additional $52 a month in interest.

If you couple this with average $20 per month reduction in your principal you payment covers, it'll take you about 29 years to pay off that debt...29 years. And they're sucking down interest every month of those 29 years. Just how much interest you might wonder...well, glad you asked. That comes to over $18,000 in interest over the 29 years, more than twice the amount of the original debt. So for that $7,000 in debt, you're going to pay back a total of more than $25,000.

Now, if that doesn't stop and make your think twice about using that credit card, nothing will.

Management of Credit Card Debt is Not Just about Paying off Your Balances Due

Don't misunderstand; paying off your balances is certainly the goal. But finding the most cost effective way to reach that goal is the smart thing to do. There are actually several methods that you can use to maximize the effectiveness of your payments if you decide that you're going to tackle this on your own. If you're going to do it yourself, there's a technique called accelerated payoff, or the snowball method, and you'll see why momentarily.

Lets' assume you have three credit cards with debts of $1,500 at 12%, $2,000 at 27%, and $2,500 charging 18%, and you're currently paying $100, $125 and $150 each month. With this payment schedule you're gong to pay off the $1,500 debt first. As soon as that debt is paid off, take the $100 your were paying and apply it to the $2,000 debt, making that payment $225 a month rather than the original $125. And you're still paying $150 on the $2,500 debt.

When you finish paying off the $2,000 debt, take the $225 you were paying and apply it to the $2,500 debt. Now you're paying $375 a month towards the remainder of the $2,500. Before you know it all three debts will be paid off. Notice that you always paid $375 a month... it's just that at the beginning, you split that up between three debts, then two, and finally applied the total amount towards a single debt.

By using a method like this, you can pay off your debts in a much shorter amount of time than you would have otherwise. The trick, of course, is to stop using your credit cards to make additional purchases while you're paying off your debts. Actually it's a good idea to stop using your credit cards altogether, except for emergency purposes... and that doesn't mean you're dying for a mocha latte.

Finding an Alternative Credit Card Debt Management Program

If you don't think you can do this on your own, your best alternative would be to seek out a non-profit credit counseling service that offers a debt management plan. Do an Internet search for non-profits that are accredited by the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.

These companies typically employ experienced financial professionals who do this work out of a need to help correct some of the more egregious practices of the credit card industry. And keep an eye out for lists of companies that you might want to avoid, there are plenty of then on such sites as creditinfocenter com