April is Financial Literacy Month, so Destinations Credit Union will provide several articles this month to help you financially.  This article deals with understanding how to reduce your credit card debt.

If your credit card spending has caused a stack of debt to pile up, it’s time to reverse the trend! With focus, discipline and patience, you can reduce and eliminate your credit card debt, no matter what the amount. Here are some tips…

1. Create a detailed list of each debt, including the name of the debt, the amount, the current rate and the minimum payment due.
2. Rank your list from the highest rate to lowest.
3. Review your current household budget to determine how much you can put towards monthly debt repayment. If you are adding debt on a monthly basis, it means your discretionary income is actually negative. Start searching for items that you can reduce or eliminate from your budget. Keep in mind that your goal is to free up cash for debt reduction. While this will cause temporary discomfort, you’ll have freed up a tremendous amount of monthly cash flow when you get this debt repaid.
4. Starting with the highest interest rate debt, apply 100% of the total new discretionary income (or the extra amount you’ve budgeted) to this account until it is repaid in full. Continue to pay the minimum amounts on all other cards. This is critical – don’t spread your monthly discretionary income across all debts equally.
5. Once the highest interest card has been repaid in full, apply the original discretionary amount AND the amount from the paid off debt to the card that you ranked second one on your list. Repeat this pattern until each card has been paid in full.

And remember, this method can be used on ALL debt – not just credit cards.

 If you qualify, you may be able to consolidate all of your credit card debt on to a lower rate Destinations Credit Union MasterCard.  There are no balance transfer fees, so you may pay lower overall interest.  Then you can pay all of your discretionary income on to one credit card and simplify things.  The key, though, is not to continue using all of your credit cards.  Cut them up!