5 Ways to Become Debt Free This Season

The season of resolutions is fast approaching, and one promise debt-laden consumers should make -- and keep -- is to take the necessary steps to free themselves from their financial burdens. People often get overwhelmed by their financial problems and do nothing to rectify them, but this is the worst possible course of action. Lack of attention only makes things worse.

Luckily, the resolution to become debt free need not be some lip service devoid of actual plans for execution. There are five clear-cut steps consumers should take to pull themselves free of their credit card debt.

Step 1: Evaluate necessities
While this step is perhaps the most logical, it may also be the most difficult. It sounds simple to exorcise unnecessary things from your life, but what do you consider unnecessary? Iit might not even cross your mind that you can live without some of life's perks. But you must realize elaborate cable and cell phone packages are not necessities. Neither are vacations or restaurants.

Pay for only those things you absolutely cannot live without -- food, shelter and health insurance -- and put the money saved toward systematically chipping away at your debt. Soon you will have zero balance and be able to increase discretionary spending, albeit responsibly.

Step 2: Make payments strategically
Most people's debt does not originate from a single credit card, but a combination of balances held on various cards with different interest rates. To effectively lower the cost of your debt you should concentrate payments toward the debt with the highest associated APR.

Imagine your debt comes from a combination of balances held on a Chase Visa ( JPM), a Capital One MasterCard ( COF) and a Discover ( DFS) credit card and that each has a different APR. The required minimum payment for each card is $50, and you have $300 to put toward their payments each month. Instead of paying equal amounts to each card, apply minimum payments to the cards with the two lowest interest rates and $200 to the card with the highest APR.

Once this card's balance is zero, apply this technique to the remaining two cards. After you reach zero balance on all of your cards, you can use their monthly payment allocation to your car payment or mortgage until you are completely debt free.

Step 3: Don't pay less than the minimum
Credit card companies generally regard payments below the minimum amount required as no payment at all. So if you do not have enough money to meet the minimum payment, refrain from paying anything until you do.

If you are delinquent, however, remember that there is a big difference between the required minimum and the total amount due. The minimum payment is the amount required to avoid slipping further into delinquency. The total amount due is what you must pay to become current on your payments, which is the sum of the minimum payments you have missed plus the upcoming minimum payment.

Step 4: Negotiate
If you start falling into delinquency and the aforementioned options prove unsuccessful, you should call your lender and try to negotiate for a lower debt total, decreased interest rates or a payment plan that involves a lower monthly minimum.

You must approach these negotiations with knowledge and tact, however. Call your issuer knowing how much you can afford in terms of lump-sum and per-month payments. Explain your situation calmly and politely and do not exceed your means with the terms of any agreement, because breaking restructured terms will likely trigger expensive penalties.

Step 5: Consult a professional
If your negotiation efforts fail and your debt continues to worsen, it might be worth paying a professional for either debt settlement or debt management services. Debt settlement is when your credit card company is concerned by the fact that you are severely delinquent and agrees to lower your debt in return for you paying off the decreased sum with a single payment. Debt management involves developing a payment plan that often includes lowered interest rates and decreased monthly payments in exchange for closing all your credit cards.

While these methods require an outlay of money, they might be worth the extra cost because of the experience and relationships these organizations bring to the table.

Do not, however, pay any company that promises debt relief before it actually provides you with tangible results. Recent Federal Trade Commission regulations preclude debt-relief telemarketers from charging for services not yet rendered, but there are many unscrupulous companies in this category, and caution must be exercised nonetheless.

If these options are either inapplicable or unsuccessful, you might want to consult a bankruptcy attorney. Bankruptcy is a last resort, but don't take it out of consideration if it helps you in the long term.

Ultimately, there are numerous ways to approach debt reduction, but all start with setting a resolution to fight your debt and stick to it. You have the roadmap to a zero balance; you simply need to take the first step.

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This article is written by Odysseas Papadimitriou, CEO of CardHub.com, an online marketplace for credit card offers and gift card exchange.