GETTING RID OF YOUR CREDIT CARDS INTEREST

The single most devastating expense you have is the interest on credit cards. Most people don't realize how much they pay in interest or how much difference even the smallest changes can make. Here's an example:
Say you have a credit card that has a balance of $1,500. If the annual interest is 21 percent (a fairly standard rate) and you make the minimum payment of 3 percent of the balance each month, repaying the total will take you more than 14 years, and you will have paid more than $1,800 in interest (for a total of $3,300). If, on that same $1,500, you pay just $5 over the minimum payment each month, you'll save more than $600 on interest and cut more than fve years off the repayment time. If you pay $10 more each month, you'll cut nearly $900 and eight years off the interest and time.

These numbers highlight the dramatic difference that even a slight increase in monthly payments can make. But remember that these figures are based on the assumption that you don't spend any more after you run up the initial $1,500. If you keep adding purchases, they all figure into the interest rate, increasing interest payments and making the repayment time longer.

In our technological age, many reliable software programs are available to help you monitor your budget. In addition, online banking is an excellent tool for keeping up to date on your checking accounts. It provides data that can be downloaded quite easily into your budgeting software, generating easy-touse reports to help guide your decisions.

Beyond the technology that can facilitate monitoring, keep in mind that budgeting is not static. It’s a process that involves becoming aware of your goals and spending habits, as individuals and as a couple, and communicating what you learn with your partner.
Inevitably, the time will come when one of you blows a portion of the budget. Don’t view it as a catastrophe, or a pretext for recriminations or scrapping the entire budgeting concept. Rather, let it be a catalyst for a calm review of your goals and spending habits that may lead to modification of your budget. As with most of the financial aspects of marriage, regular communication is the key to success.
Staying out of significant debt doesn’t hurt either. In fact, the subjects of debt avoidance and debt management are so vital to successful budgeting that they merit a separate discussion.

For many reasons to avoid costly penalties, to maintain a good credit record, to diminish your debt, to keep your creditors at bay - you must continue to make the minimum payment due on each card on which you owe. After you account for those expenses, any discretionary income that you have left in your budget.
If you planned your budget with more than the minimum payment going to each card with an outstanding balance, redo it so that you're paying the minimum on the cards with lower interest rates and putting the rest of your "extra" money toward paying of the highest-interest cards.

Follow these steps:

1. After you create your budget and plug in the minimum payment for each credit card, take as much of your discretionary income as possible and use it to pay down the credit card charging the highest interest.

2. After you've paid off the credit card with the highest rate, put your discretionary income toward the credit card with the next highest rate.
3. Continue this process until you've paid off all your credit cards, continuing to take the card with the highest interest rate and put as much discretionary income as possible toward that debt.

Discretionary income is, as its name implies, money that you can use at your discretion. Occasionally, you may want to reserve a little more discretionary income to celebrate the holidays or enjoy a much-needed weekend away. However, until you're getting cozy with that 25 percent debt fgure, you want to plow as much of your discretionary income as possible into paying off high-interest debts.

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