Want to Lower Your Debt? Start by Consolidating Your Credit Card Data

Often the hardest part of starting a debt reduction plan is facing the truth. You may have several credit cards with balances, but you may not even know how many credit cards you carry or have any idea how much total debt you owe. How can you begin a get-out-of-debt program without knowing this information? It's simple - you can't. Organization may be the most difficult step to confront, but it's also the most critical because it's the foundation for any debt reduction strategy.

When you realize that it's time to get your debt in order and under control, start by gathering the most recent monthly statement for each of your credit cards. In a computer spreadsheet or on a piece of paper, create a table that lists each credit card you carry (even if it has a zero balance). For each card, include relevant information such as account number, current balance, current interest rate, minimum monthly payment, finance charges, and credit limit.

Don't forget to include department store and gasoline credit cards on your list. These types of credit cards usually charge the highest interest rates, sometimes up to 22% or more. There was a time when many retailers didn't accept bank credit cards like Visa and MasterCard, but most have given in over the years. If you like to shop, and if you carry high balances on your credit cards, you can save some money by shopping around for a credit card with a low interest rate, instead of using department store cards.

Add all balances from your table and write down the total. This exercise may be the first indication of how far in debt you really are. It may be painful or scary, but you need to go through with it. Reading the total on paper (especially if it's much higher than you thought) is sometimes the push a debtor needs to begin the journey to recovery. If it starts you toward a debt-free lifestyle, that initial shock is certainly worth the trouble.

Once you've really looked at the total and you're ready to do something about it, gather any low-rate offers you've received for new credit cards or from your current cards. If you normally throw them away, start saving them instead. These special promotions may be the ticket to saving big money. However, when you get a low-rate card and transfer balances, you need to make sure you get rid of your older, high-rate card. If you don't, you'll just have another credit card to get into trouble with.