There are times when couples don’t have a choice. If they purchased a home with both names on it, then both will always be responsible. If taxes were filed as a married couple both parties are responsible. In this day and age co-signing a car loan or any other type of loan means both parties are responsible as well.

Credit card debt is another story. It turns out that, unless one party passes away, the husband or wife isn’t responsible for their spouses debt. If the debtor gets sued and has their wages garnisheed, it only affects the person whose name is on the account. So, there are times when one party really has no responsibilities for the expenses of their spouse.

So, should couples combine their debt load? Truthfully, yes they should, but for two reasons. One, if you hope to remain a couple it’s probably the thing to do because it could cause resentment. Two, it helps because both parties in the relationship could get one blanket deal that could end up saving them money while getting the debts of both people paid off.

It’s also easier to get a loan from the bank if the household income is combined, as the higher the income the easier it is to get a loan of some type, even if it’s just a line of credit.

Of course, before getting married discussing the debts each person has is an imperative step. All debts should be out in the open before getting married because one or the other could find out that their relationship is a sham and based on financial needs, and that will just add a layer of complication that no one needs to deal with.

The truth, however, is that most people don’t know how to calculate the type of debt they’re in, so they go into looking at debt consolidation without any real idea of what their financial situation is. The biggest problem most of them have is understanding their credit card debt.

Here’s the problem with credit card debt. Most people look at the minimum amount due and decide whether they can pay that amount or not. Though it’s the easiest thing in the world to do, it’s not quite indicative of your debt load. Most people don’t know this, but if you’re paying the minimum amount on your credit card and stopped spending today, it could literally take as long as 9 years for you to pay off that debt, if not longer, depending on the annual percentage rate (APR).

To do some calculations on just what you’re up against, you’ll need a spreadsheet program like Excel, although you can also do it with regular paper and pencil, but it’ll take you longer.

In the first column, put in the amount that’s outstanding; let’s use $500 for our example.

In the second column, put in the amount of your APR, divided by 12. This is the closest you’ll get to figuring out how much your interest is on your balance monthly, as some banks do their calculations twice a month; you should switch to a different credit card account if this is the case. Anyway, the formula for this in Excel would be (+.159*12), if your APR is 15.9%. If it’s something else, put in the number the same exact way. For this example, it leaves a monthly figure of .01325.

In the third column, type in the formula (+A1*B1). This will tell you how much interest will be added to your balance. In this case, we get $6.625, which will round up to $6.63; banks always round up.

In the fourth column, type (+A1+C1). This will give you your new balance, which in our case it $506.63.

In the fifth column, put in your minimum monthly payment amount. For our purposes, let’s say it’s $25.

In the sixth column, type in (+C1-D1); by the way, these don’t have to be capitalized, and don’t include the parentheses. This brings our total down to $483.63.

Then drop down one line. In A2, type +F1. This will bring down the same exact amount as the total in your last column one line above.

Next, highlight all the other entries in the first row, copy them, then come down to the second line, second column, and paste. This will bring down the formulas and other numbers you had above, with one change, that being the final column. That will show your balance decreasing after each payment.

If everything looks kosher, the final piece is to copy the entire second line, drop to your third line, and copy the formula into multiple lines at one time. Go down at least 25 lines for right now. What you’ll see is that on line 24, your outstanding balance that’s left is $9.67, which means your total balance will be paid off with your next payment. Count every 12 lines as a year, and this balance will be paid off in two years by making only the minimum payment and not putting anything else on this account.

Now, what you can do is alter the column that shows the minimum amount and put a different dollar figure in there. For instance, if we put $40 in instead of $25, this account will be paid off in 15 months, which not only saves you 9 months of payments, but around 42% in finance charges.

These simple steps will give you a much better idea of where you sit financially with your outstanding credit card debt, and you can use this same formula for other payments you have to make that have interest rates. Knowledge is always the most important thing to have when you’re looking at your outstanding debt, especially if you’re thinking about consolidating it.

Stop Using Your Credit Cards

The first and most important thing to do if you plan to pay your debt off is to stop using those credit cards. It is impossible to pay your balances down if you do not start living within your means. Create a budget that you can live with and commit to, then cut all but one emergency card up. Give up the luxuries, you do not need something from every convenience store in your city and you do not need to eat out several times a week, spend wiser, your financial independence depends on it.

Transfer balances to a Low or 0% interest credit card

If you have credit card debt and you are paying interest on carried balances, you are throwing money away every month. If you have good credit and get the opportunity, consolidate your balances to one credit card, or as few as possible. This will help reduce the amount of money you toss away every month by paying interest fees and it will free up additional cash that you can use to begin paying down your balances.

A great way to start consolidating your credit card debt is to look and see if you have available credit on any lower interest rate cards. If you do have available credit, call your company and ask them to transfer the balances; do not forget to ask if they have any balance transfer offers. When calling your company, start with your oldest credit card, you might end up discovering that you already qualify for a higher limit. In addition, banks and financial institutions appreciate your business and if you have been a good borrower, you could get a credit increase and a lower interest rate.

You may also be able transfer balances from one card to another by using promotional checks that you received from your credit card company in the mail. If you do use a check, make sure it is a balance transfer check, and not a cash withdrawal check tied to a high interest rate.

If you lack available credit on any of your current cards, it might not be a bad idea to open a couple new accounts that offer low interest rates on balance transfers. You have already stopped using your cards, so open new cards if they will help get you into lower interest rates. It is common for people to constantly transfer and consolidate debt to cards with lower interest rates.

Pay More than Your Minimum Payment Each Month

If you are trying to pay off your credit cards, you will need to create a plan that makes the most out of your monthly payments. Everyone has a unique set of circumstances, so there is not a plan that fits everybody. A few things however, work best for most people.

If you are paying interest on credit card debt, the card with the highest balance is usually the card that is costing you the most in interest each month. Pay the minimum on your lower balance cards and attack the principle on the card with the highest balance.

When the balance on that card gets lower, re-evaluate your cards to make sure you are still paying off the most expensive credit card. When doing this, consider the interest rates on the cards. If you were previously paying off a card with a 4.99% interest rate, it might be a good idea to start paying off that card with a 12% interest rate. The only way to know is by looking at your monthly statement to see which card charges you the most in interest fees each month, look at the amount and not the interest rate.

Evaluations may occur as often as each month, but if you continue to put extra money towards the most expensive card, you will save more money each month. After you get a few cards paid down, check to see if there is an opportunity to consolidate debt from high interest rate cards to cards with lower interest rates. Do not forget to call your card companies and ask for a better interest rate after you pay down balances, you might be able to get a great deal.

Consolidating your credit card debt and paying your balances off is not always an easy task, but a debt free life provides more opportunity for you to save for your future. Buckle down and stick with your commitment, a debt free life is a great feeling.

See Also:

Knee Deep In Debt – Federal Trade Commission

3 Tips to Alleviate Your Debt