Credit card companies love the fact they we only pay the minimum payment every month. Why? because they are raking it in while the interest rates are crippling us. So what started out as a small credit card bill could escalate into thousands of pounds. Say your credit card statement arrives your balance is 2000 the minimum payment is 40 which is 2% of your balance, if you keep paying just the minimum payment its the interest that most of your 40 is going to and not much to your bill.

The minimum re-payments have dropped as the credit card companies and banks originally charged 10%, but they found that customers where paying their debt back a lot quicker with the 10%. So the way for them to get more interest out of us was for them to reduce the percentage of the minimum payment, making us think that they where helping us but in fact they where just getting more money from us by adding on more interest, as it will take longer for us to pay of the credit card bills.

So what to do if you find yourself in this situation:

Stop using your credit card, better still cut it up (in case you get tempted) Sit down and workout how much more you can pay than the minimum payment theyre asking for, once you have worked out how much stick to it even when you see the minimum payments going down dont be tempted to reduce your payment or your be back to square one.

If you have more than one credit card the best way to reduce your debt is once again stop using them. Work out which one has the highest interest rate and make the highest payment to that card. Keep paying the minimum payment on your other cards and once the card with the highest interest rate is paid off, go to the next highest card and so on until all your cards are paid off.

You may have to tighten your belt in for a while but this will save you a lot of money in the long run. Yes we all need credit cards and if you use them properly they are fine, but if you cannot afford to pay them off at the end of the month then this is when you get yourself into all sorts of trouble.

Case Study:

A friend of mine asked me to take a look at her monthly credit card statement; according to her, she has stopped using this credit card and try to pay it off, but feels like she isn't getting anywhere.

The credit card statement record shows her balance is $5218.00 and she is paying 18% of interest; and she is paying the minimum payment at 3.5% or $10 whichever is higher. Like many who confuse with financial matters, she thinks that as long as she stops using the card and by just paying the minimum of monthly balance, her credit card debt will be cleared soon.

The Calculation Result:

If she has stopped using this credit card, and if she continues to make the minimum required monthly payment, as she has been, based on the way her bank calculates her minimum required monthly payment.

It will take her 181 months to pay off her current credit card balance of $5,218.00 and she will pay a total of $3762.35 in interest.

In other words, if she continues doing what she has been doing. It will take her 15 years and cost her $8980.35 to pay off her $5218.00 credit card balance. No wonder she feels like she is not getting anywhere.

So, what should she do?

Actually, it quit simple, if she able to pay the minimum payment of $5,218.00, which is $181.37, which means this is her affordable amount. Instead of paying the minimum payment as defined by the credit card company, she continues to pay $181.37 from now on.

As the result, she will pay off this credit card in 43 months instead of 181 months and she will pay $1635.45 in interest instead of $3762.35 in interest, saving $2126.90 in interest charges. See the different?

What she can more?

If she really wants to go for it, she could increase the amount of her "new" self-imposed minimum required monthly payment. For example, if she were to start paying an additional $18.63 a month for a total of $200.00 a month.

She will pay off this credit card in 34 months instead of 181 months and she will pay $1428.30 in interest instead of $3762.35 in interest, saving $2334.05 in interest charges.

If she were to start paying an additional $68.63 a month for a total of $250.00 a month, she will pay off this credit card in 26 months instead of 181 months and she will pay $1071.09 in interest instead of $3762.35 in interest, saving $2691.26 in interest charges.

If she really wants to eliminate her credit card debt as soon as possible and her financial is able to support it, she could double the amount of her "new" self-imposed minimum required monthly payment. If she were to start paying $362.74 a month instead of $181.37 a month, she could pay off her credit card balance in 17 months.

In Summary

There are a number of things she could do, but this is one of the simplest and it's something she can start doing right now to begin eliminating her credit card debt. You can do the same to start eliminate your credit card debt.

If all you do is stop charging on your credit card and continue making the same minimum required monthly payment you will be making on your credit card this month, every month from now on, you will make significant progress towards totally eliminating your credit card debt once and for all.

Ways to Get Out of Credit Card Debt
Getting out of credit card debt is a slow and gradual process. Its not something you can immediately cut off from your life. Be patient and diligent, and your efforts will pay off sooner later.

Step #1 Determining the Best First Step
In a practical point of view, the best credit card debt to tackle first is the one charging you the highest interest rate. Even if it doesnt have the highest amount consumed of its limit, its still what you should start paying off first because it presents the greatest possible risk to yourself.

Some people, however, prefer to pay off the lowest total amount due on their credit cards first. Although this is not the most practical thing to do, mathematically speaking, it could still be a good choice for your first step if seeing your credit card statement reflecting zero debt could give you the boost you need.

The important thing to remember here is to take that first small step forward in cleaning your credit records. Its going to be tougher, but at least youre finally breaking free from the shackles of debt.

Step #2 Establishing a Budget
Take a long, good, and hard look at your finances. Trace your cash flow every month. How much are you earning all in all and how much youre spending? Obviously, the inflow of cash should be greater than the outflow. If its not, youve got a bigger problem to solve.

List down your monthly expenses and then consider each item one by one. Which are necessities and which ones are mere frivolities? Necessities should be left alone, but frivolities must be reduced. While you dont have to ruthlessly get rid of all the unnecessary things in your life, its important that you significantly reduce them to make way for the bigger payments youll be making for your credit card debt.

When you know how much you can afford to pay each month, make sure that a considerable amount of it will be used for settling the first credit card youve decided to pay off. The rest should be divided equally among your remaining credit cards.

Step #3 Controlling the Urge to Swipe
Dont compound your problems by continuing with your swiping habit. Theres no way you can get rid of credit card debt if you continue using your credit cards, after all. For now, you should stick to paying cash for both necessities and luxuries.

Step #4 Change of Lifestyle
Lastly, make the needed adjustments to your lifestyle so that you can continue living within your budget. There are a lot of things you can change to live frugally, and well leave it up to you to determine what you can and cant live without.

Soon, youll find yourself liberated from your credit card woes. Unless you want to become a victim of a vicious cycle of never ending debt, make sure you dont commit the same mistakes you did in the past.

When you are in over your head with credit card debt, relief can seem miles away. Sometimes it seems like you are working as hard as you can to make the minimum payments or even to just barely cover the interest on your balances.If you want to get out of the cycle of credit card debt follow these 3 easy steps and you will be on your way to financial freedom.

1. Switch to a lower rate card.

If you can switch your balance from a higher rate card to a lower rate card, you can save quite a bit of money. Even a card with a 5% lower interest rate will make a difference on the amount you owe on your monthly credit card statement. Take the money you save and apply it to the balance to reduce your debt even faster.

2. Pay on the principle.

It is very easy to fall into the trap of just paying the minimum payment on your credit card statement, but if you make a practice of this, you will never get out of debt. The only way to eliminate credit card debt is to plunge in and pay it off. The more you pay on the principle the less you will be paying in interest, and you will start to see a difference in the amount of money you are being billed each month.

3. Dont add to your debt.

Make it a rule that the credit cards are only used for special or emergency purchases. Stop buying things like groceries or clothes using your credit card. Chances are if you are going to put an item on the card, you will often end up buying things you hadnt planned to buy. These impulse buys may be convenient, but they add up, and you will be paying for them long after their usefulness is gone.

Your Credit Limit

Number 1 in any understanding of your card is that your credit limit is just that, a limit not a target. In other words, while it is easy to understand why people max-out their credit cards in the first month, you need to always remember that your limit is that maximum you can use and not the amount you must use. Moreover, you should always be honest with yourself and ask yourself from time to time whether or not you genuinely believe, given your current financial position, you can repay your credit card debt. If you feel that your credit card debt is becoming overwhelming, talk with your card provider about decreasing your card limit. Keep in mind that you can always increase the limit again should things become financially more secure.

Your Credit Card APR

The APR you are paying on your credit card will be affected by what your credit rating score is. Keep this in mind and try and make sure you always keep the interest payable on your outstanding balance to a minimum by ensuring that you keep a good credit rating.

Your Credit Card Statement

If you have become afraid to receive a credit card statement then you may be equally afraid to read your credit card statement. However, this is possibly the most important time for you to be reading the statement as you may be being charged extras, such as late payment fees, which increase your account amount and thus you minimum monthly repayment amount. If you are making the wrong minimum monthly repaying as a result of what you guess the amount should be you are liable to be charged additional fees. And do the spiral continues.

Dealing with credit card debt is all about knowing how much you have to repay and how much you have available on your balance. This does not mean, however, that just because you made a repayment you have to use the credit card again the next month. Ideally youll make a repayment and not use the card again for a while. If you are using your credit card to sustain your day to day living then the time may have come for you to consider a consultation with a financial consultant to seek other ways to manage your credit card debt so that you can get things back on track.