Budget

• The best plan to build credit and properly use credit cards is to pay the balance off in full each month. This can be done by either allotting a certain amount per month in your budget to your credit card or by simply only charging one item per month to the card. This is a great way to limit the fees associated with a credit card and to use them wisely.
  
  

Debt Reduction, Step 1

• If a borrower has accumulated any credit card debt that he is not able to pay in full monthly, he should begin by first contacting all the credit card companies that he owes. If the borrower has paid on time each month for the past year, he can request a rate reduction. This helps to limit the out-of-pocket interest expense and helps the borrower pay down the debt faster.
  
  

Debt Reduction, Step 2

• The best method to pay off debts is called the snowball method. First, the borrower should list all of her debts on a sheet of paper---including the total debt owed, the monthly payment and the interest rate. Sometimes the whole picture is overwhelming, but it is needed to be able to properly attack the problem. Next, list the debts from smallest monthly payment to the largest.
  
  The borrower should, at the same time, create a budget. List all of his expenses per month and all of his income. The budget should be reviewed to see if there are ways that extra funds could be created by either cutting expenses or increasing income.
  
  Now, the borrower should look at the smallest monthly payment owed. He should begin to pay that monthly payment and add additional funds from his new budget. Once that debt is paid in full, the borrower should begin to attack the second lowest monthly debt payment and add the first payment and excess funds to that payment. Once that debt is paid in full, the pattern "snowballs" to make a much larger monthly payment on the next debt until all debts are paid in full.