A credit card is a card issued to a client by a financial organization to enable the purchase of goods and services at a pre-approved limit. The organization uses your borrowing history and credit score to reach an appropriate limit for this loan. You cannot use the card beyond the set limit because this leads to high charges. You also need to make the minimum monthly payments to avoid unwanted additional charges and bad credit ratings. Using a credit card is a convenient way to pay bills and increase your credit score. However, they can be costly when spending spirals into debt.

Reasons for credit card debt

1. The debt overcomes income
2. Late payments
3. Medical expenses
4. Unexpected emergencies like car/household repairs
5. Overspending on events like weddings, birthdays, or sale offers
6. Credit card promotions

Credit card debt numbers are high as more people continue to fall on hard economic times. Therefore, finding effective credit card debt reduction methods is vital.

How to reduce credit card debt

1. Negotiate lower interest rates

If you have been a long-time customer with a good loan repayment track record, you can always ask for a lower interest rate when registering for a credit card. Informing the issuer about a new financial load like unemployment or sudden medical expenses may help you plead your case. Let them know about your repayment history, credit score, the number of products you hold with them, and the number of years you have invested in their company. However, the issuer is not inclined to oblige to this request, but it does not hurt to give it a try.

2. Seek counseling

The increase in credit card debt has influenced a lot of agencies to start credit card counseling. Those in debt get training on ways to get out of the financial burden and learn better spending habits. The counselor reviews your finances and explains the options available for you to reduce the debt. Counseling agencies can act as a go-between for you and your creditors and help you negotiate lower rates. They assist you to come up with a repayment plan and can provide you with legal representation.

3. Tackle one loan at a time

It can be overwhelming once your debt gets too high. Prioritize the debts and pay them off one by one. You can categorize them as medical, household, travel, etc. and tick them off the list as you pay. Using this method can reduce the anxiety from large sums of money stacked together and motivate you to keep going.

4. Make a budget

Many people get into debt because of overspending. The money you use on your credit card should be within your income range. Making a budget for your spending will help you maximize your cash flow and enable debt reduction. Make a list of your bills and temporarily cut out unnecessary needs. The free cash flow, which is the money left after you make your budget, can help you reduce your debt.

Debt reduction requires commitment. Remember, the faster you pay, the lower your interests will be, and the more your credit score is secure.