One of the first keys to using credit wisely is to avoid any unnecessary debt by using cash as much as possible instead of bank cards. There could be a time in your life when you find yourself besieged with high debt and credit card bills. If this is your situation do not worry because there are proven steps to get you out of credit card debt.

Stop using your bank cards for your purchases. One of the first steps you will need to take is to stop using these altogether. Immediately stop charging anything additional on credit cards. When you purchase items like gas and food with your credit card because it is convenient then your debt reduction increases. Your credit card isn’t a free gift card, so you do not want to treat it that way. You can begin with using your debit card or cash for small purchases like food and gas.

Many people find that they spend much less with this method. And if you can’t afford to put it on your debit card, you probably shouldn’t buy it. Pay with cash as often as you can. Destroy those credit card offers when they come in. Not seeking out new credit is one way to have debt reduction. When you decide to make a major purchase, save up and use cash. Create a budget and stick by it.

This may seem obvious, but one of the reasons your debt is out of control is that you keep adding to it. Debt elimination is when you stop using credit period. Don’t finance anything because the truth is that you can live without it. Cut up all of your credit cards right down to the last one. Don’t make any more excuses. It doesn’t matter that other personal finance sites say that you shouldn’t cut them up. Destroy all of them today. Stop rationalizing your need for them.

You don’t need plastic for anything. If you’re in any kind of debt, then credit cards are a trap. They will only put you deeper in debt. Later, when all your credit card debts are vanished and your finances are manageable, maybe then you can get just one credit card. The goal is to be debt free.

It is very necessary to find out exactly how much you owe on each credit card. You will want to pay more than the minimum payment in order to keep on top of your debt situation. Paying off the entire balance would be good. If you can’t pay off the entire balance, at least make a payment that is over and above the minimum that is due. Most of your minimum balance payment goes to interest and not principle. When you only pay the minimum you will never pay off the card or it will take years. Depending on the balance outstanding, add an extra fifty to a hundred dollars to the minimum in order to diminish the principal balance. As you are doing this, try and stay away from using your credit card.

Remember don’t just pay the minimum balance on your credit cards. If you have more than one credit card, focusing your hard work on paying off one card at a time while making minimum balance payments on the others is acceptable for now. When one card is paid off, make the same payments on another; do not use the extra money as spending money.

Something that you may want to consider is calling your credit card company and ask them for a lower interest rate. Believe it or not, this actually works sometimes because they would want you to continue paying whatever you can then to receive nothing at all.

If you are still having financial trouble paying your credit card debt then Contact your creditors. Contact your creditors quickly if you’re having trouble making ends meet. Explain to them why it’s difficult for you, and try to work out a tailored payment plan that will reduce your payments to a more manageable level based on your personal needs. It isn’t wise to wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.

Dealing with Debt Collectors can be very difficult. The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m. or after 9 p.m. They also may not call you while you’re at work if the collector knows that your employer doesn’t approve of the calls. Collectors are not allowed to harass you, lie, or use unfair practices when they try to collect a debt. They must honor a written request from you to stop further contact.

Consider Debt Consolidation as a way to pay off all of your credit card debt. You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. You can also get a debt consolidation loan and have one easy small payment that will fit your budget.

Debt management plans are very beneficial. If your financial problems come from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP).

Having a budget is the foundation of managing your money. Making budget is easy when you have a dependable income that’s the same every month. But what do you do when your income varies from one month to the next? This is the case for many contractors and freelancers. Your expenses remain the same, but your income doesn’t. You still need a budget and you can make one. You have to go about it differently.

Total your expenses

When you’re making a variable-income budget, start by totalling your income as you would if your income was fixed. Add up the things you spend money on every month. This includes rent/mortgage, utilities, car note, car insurance, health insurance, life insurance, phone bill, loan payments, credit card payments, and taxes. You should even calculate how much you’ll spend on variable expenses like gas and food.

Average your income

If you had a variable income last year, too, use your last tax return to come up with an average monthly income. Just divide your gross income by 12 to come up with an average monthly income. If you don’t have a year’s worth of income, average the months you have. For example, if you’ve been freelancing or contracting for 7 months, add up the last 7 months of income and divide it by 7. This will give you an average income to base your budget on.

Does your average monthly income exceed your expenses?

Your average monthly income needs to meet or exceed your expenses. If not, you’re going to run into a cash flow problem. Adjust your expenses to fall below your average monthly income. Some examples of places you can cut back are: gas, food, utilities (save on electricity), and entertainment. For more ways to cut your expenses, go through each category and decide whether it’s a need or a want. Wants can be cut out.

Your budget in practice

You’ll need to have at least three accounts – one checking account and two savings accounts.

The checking account will hold your monthly income that you use to cover bills and other expenses.

One savings account will hold your income then be used to “pay” yourself at the end of the month.

The other savings account will be for savings. You will only deposit money into this account. You will never withdraw money from it unless it’s to invest it in a higher interest rate account.

Start your budget at the beginning of the month. Your checking account needs to have enough in it to cover your expenses for the month.

As you get paid throughout the month, put the money into Savings Account #1. You shouldn’t have to touch your savings account during the month. If you do, then you didn’t budget enough for your expenses or you’re overspending (or you ended up getting paid less than average, see below). At the end of the month, around the 28th, transfer $2500 (or what you need to cover your expenses) into your checking account.

Less than average months vs. higher than average months

When your income varies, some months will be less than average and some will be higher than average. Once you’ve been using this variable-income budgeting method for a few months, you won’t notice the ups and downs of your budget as much. The surplus months will build up your savings account to help offset the “famine” months.

However, if you experience a “famine” month in the first 1-2 months of using this variable-income budgeting method, you might have trouble meeting all your financial obligations. In this case, you have a few options. Cut back on some of your expenses (the best option). Pull from your emergency fund (which ideally has 6-12 months of living expenses). Pull from your savings (only when options 1 & 2 don’t work).

Don’t let a famine month discourage you. Like I said earlier, once you have a couple of months where your income is at or above your average income, your savings will build up and the bumps will smooth out. Give it six months and you’ll be happy you did.

Are you in the habit of whipping out your plastic for every purchase?

Now days, most people have the same problem.

With gasoline and other everyday expenditure on a steady rise in cost, most Americans turn to credit cards to pay for their everyday expenses.

But with this influx of credit card use comes an influx of bills that become harder and harder to pay each month.

Sources of cash for many Americans are withering away, says Dick Reed, of the Consumer Credit Counseling Service in Atlanta. Reed has noticed a rise in business as more and more clients are mounting up credit card debt. He goes on to say that customers simply do not have a place to go and get cash. They are digging further into debt in order to pay for, not only standard everyday expenditure, but in order to make the minimum payment on existing debt.

National statistics exemplify this growing trend as the Federal Reserve reports that the average amount of credit card debt in America jumped 6.7 percent in quarter one this year and totaled around 957 billion dollars. Perhaps most troubling is that this increase developed in spite of the fact that most financial institutions are tightening the reins on lending.

In Atlanta, Georgia debtors reported, on average, 29,300 dollars worth of unsecured debt. The most of which was wrapped up in credit cards. This number is up over 4,000 dollars since the 2007 report. Debtors spend an average of 335 dollars on groceries and 242 dollars on gas, whereas one year earlier, those expenses averaged only 291 dollars and 181 dollars.

Many people admit that they’d rather not rack up credit card debt, but other options, like refinancing for lesser interest rates, are no longer readily available due to collapsing housing markets. This leaves many consumers with little option.

When faced with the rising prices of gas and food, many people find that they have no choice but to “charge it” in order to make ends meet.

People are unable to upgrade their income, yet expenses are increasing exponentially. Credit cards become the best way to compensate, says Sara Gilbert of the Consumer Credit Counseling Service in Ft. Collins, Colorado.

Lois Eldridge, a retiree in Arizona, has looked on in horror as her credit card bill doubled to 2,000 dollars in the last several months. High gas and food costs required her to charge these rudiments for the very first time last year.

She has been forced to reduce extra expenditures like entertainment, clothing, and eating out. Although this tactic has helped, she still charges an average of 100 dollars each month.

Lois was also forced to ‘come out of retirement’, so to speak, when she attempted to secure a job at the college in her area to complement her income from Social Security. Unfortunately, she learned that employers offered too little money, or informed her that she was ‘overqualified’ for the available position. Her only other option was a minimum wage job with a local retailer.

My earnings have remained the same even though my expenses are way higher than they were last year even taking into account my attempts at cutting back, says Eldridge, now 71, who has a plan to put her tax refund toward her outstanding debt. I am incredibly overwhelmed by the fact that I’ve had to use my credit cards. I’ve never needed to before. The last 6 months have been a constant worry.

She is not the only one in worry. Analysts declare that card balances and late payments are increasing dramatically, a sure sign that a large group of Americans cannot afford what they spend each month.

It seems that the most trouble seems to be in areas with a weak housing market where a large number of people are already under pressure with mortgage payments. With unemployment on the rise and employers unable to offer overtime, many people find they just don’t make enough to cover their bills.

Many claim they only use their cards for expediency sake and that they do in fact pay their statements on time, but it seems some fractures are appearing in that scenario.

Credit card delinquency rates reached a four-year in February, according to Moody’s debt ranking agency.

Once people have gotten behind, it’s growing more and more difficult for them to get back on track with their card payments again says William Black of Moody’s. We’re in a very taxing economic atmosphere. There’s a lesser amount of cash to go around.

In the meantime, credit card balances are sneaking up progressively, and have been since the beginning of 2006. They leaped nearly 9 percent during 2007. This is due to a growing number of people who spend more and pay less each month plus other exciting and attractive offers like Chase credit cards, 0% interest Visa card balance transfer, and more.

Another sad fact is, in spite of the troubles people incur with increasing credit card debt, the number of cards issued is also on the rise. At the close of 2007, there was a whopping 420 million credit cards in the marketplace, that’s up 7.6 percent from the year prior.

Growing balances and late payments are bad for the economy, which depends heavily on consumer expenditures, says Bill Hampel, of the Credit Union National Assn.

Many people will stop going to dinner or to the movies as they see their balances rise. This will injure the economy to a great extent.

If you’re buried in debt and can’t get out and would like to share your story, or if you’ve actually managed to climb out of the pit and want the opportunity to help others, let us know about situation, we want to help.