Got it all

By: CCN.com If you have been wondering what is this 'Credit Card debt' that everyone seems to be talking about, its time you knew what it actually is (even if you are not in credit card debt yet). Well, you might be getting into a debt trap yourself and the earlier to know about it, the better it is. 'Credit card debt' is simply the amount you owe to the credit card company. If you hold a number of credit cards and run a debt in all or most of them then you are already in the middle of what we call as 'debt trap' and it calls for immediate attention. Some people just keep getting new credit cards and keep shifting the debt to the new ones until they reach the limit on that credit card too and then they go for yet another one. This is how the debt trap works. You keep hoping that the things will improve and you just keep getting deeper into debt. So what's the way out? Once you start exhausting your monthly credit limits and start missing your payments, you start earning a bad credit rating with the credit bureaus. A bad rating is not only going to prevent you from getting new credit cards but will also act as an obstacle when it comes to car loans, home mortgages or any other loans. So how do you handle this situation? First of all you need to understand that there is no magic wand which can help you wipe out your debt. If it has to happen it has to happen only through your own efforts. So once you know that you are in a debt trap and decide to get out of it, you need to sit tight, analyze and prepare a list of actions you need to take. Here are the 3 basic steps for debt reduction: Gather all your debt information in a document form (could be a spreadsheet). This should include details like What is the amount you owe Whom do you owe it to What is the APR you are paying on this. How frequently do you use that card Any other details which you feel are useful Once you have these details for all your credit cards. Do a total to arrive at the total amount you owe. Check the following: How much cash you have in your bank account You income Your expenditures With this information ready, analyze how much of debt you can repay on a monthly basis. You might consider cutting down on your expenses or looking for alternative source of incomes to aid you in reducing your debt quickly. Prepare your strategy. This may include the following: Which debt to pay off first (based on the APR rates) Switch to a lower APR card Consolidate debt Seek advice from a financial advisor Declare bankruptcy Just follow these 3 steps and you will have the blue print of debt reduction ready.