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Strategies for reducing credit card debt

People in South Carolina often face financial decisions that pit saving against paying down credit card debt and other loans. To get control of these competing interests, a person should first take stock of financial assets and obligations to determine where the most benefit can be achieved.

A crucial priority for a household is the emergency fund. This savings account reserves funds to pay the bills in the event of a job loss or prolonged illness or injury. Ideally, the amount saved would equal six months' worth of household expenses. Building this emergency fund should be done before applying extra money to debt payments.

When paying down debt can begin, a person should start with high-interest credit card debt. The interest rates on credit cards and department store cards typically can be more than 20 percent. Because these interest rates far exceed what would normally be charged on a home mortgage or car loan, eliminating credit card debt offers a person the most financial gain. Once credit card balances are paid off, loans with the next highest interest rates would become the next target. Eventually a person could get to a point where only a mortgage is owed. Because home loan rates are very low, the person might benefit more by investing extra money and earning interest above what is charged on the mortgage instead of making extra payments on the house.

Life circumstances like unemployment or illness, however, sometimes make it difficult for a person to even begin paying down credit card debt. In such a situation, a person might choose to speak to an attorney about filing for bankruptcy. In many cases, filing can put a temporary halt on collection activities, and a successful completion of a Chapter 7 bankruptcy can lead to a discharge of all or a portion of many forms of unsecured obligations.

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The Huggins Law Firm, PA

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1812 Lincoln Street
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Columbia, SC 29201

Phone: 803-764-1558
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