When you are a single parent living on one income, carrying high interest balances can wreck your budget. The tips below will help you to reduce credit card debt and improve your single parent finances.
First, you must stop using the credit cards. Go to a cash-only system, and yes, you will probably have to reduce expenses to make this work. If you like the convenience of plastic, consider using a debit card which pulls cash directly from your checking account. Just remember that you will need to keep a close eye on your balance so that you do not have overdrafts.
Second, pay the minimum payments only on all but one of the balances. Pick the card with the highest balance to pay off first to make the quickest dent in your debt. Or, you may want the psychological benefit of starting with the lowest balance so you can get a card paid off sooner. For the one card that you choose, you need to pay more than the minimum balance, even if you can only afford $5.00 per month at first.
Any windfalls, bonuses, raises, tax refunds, etc. should be applied to your debt, too. Refrain from the urge to reward yourself by spending this extra money before you have actually paid your debt off.
You may be able to move your debt to a lower interest card if you have good credit. You may also be able to take advantage of cash advances from another card that offer several months of interest at free or very low rates. Just watch the fine print, because there could be a hefty cash advance fee that negates your supposed savings. Also, the interest rate after the grace period could be extremely high so you would only want to do this if you expect to have the debt paid off during the lower interest period.
Another alternative could be to take out a home equity line of credit with a lower interest rate if you actually have equity in your home. This move can be risky since if you can’t make the payment, your home is on the line. Again, excellent credit would be needed, but the interest rate is considerably lower than most credit card rates.
Eliminating credit card balances is very important for single parents. Quit using your credit cards and follow the other tips in this article to reduce your credit card debt to improve your single parent finances..
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