Store credit card accounts are a type of revolving (variable) credit that functions in the same way as do major credit cards, such as Visa, Discover and MasterCard. Your account balances and minimum monthly payments can vary each month depending on how you use them. Retail credit cards offer lower credit lines to which a higher annual percentage rate (APR) is applied. If you have retail cards from numerous stores, the sum total of minimum monthly payments and the interest you pay on account balances can quickly add up--and become a financial burden.
Step 1
Give yourself a reality check by calculating how long it will take to get out of store credit card debt while making minimum monthly payments. For example, you may have a balance of $500 on a retail store card account with an annual percentage rate of 22.9 percent. Your minimum payments are currently $20. If you made no more charges to the card, it would take you 2.9 years to pay off the balance, during which time you would pay a total of $186 in interest. If you want to determine how long it will take you to pay off your store credit card debt, use the payment calculator at the Fox Business website.
Step 2
Get all your credit card bills organized. The Credit website advises taking time to examine your store account bills. Write down how much you owe on each account as well as its APR and the minimum monthly payment you are required to make. Pay attention to the retail credit card balance with the highest APR, as well as that with the lowest balance.
Step 3
Decide which store card debt you want to tackle first. The Credit website indicates that there are two methods of paying down debt, but both require you apply more than the monthly minimum payment toward the accounts. You can pay down the debt with the highest APR first and then move onto the account with the next-highest APR. But you can also pay off the retail account with the lowest balance first and then move onto the next-lowest balance. (Make sure to make the minimum monthly payment on all other store card accounts to keep your credit scores healthy.)
Step 4
Determine how much extra cash you have on hand to pay down your store credit card debt by making a personal budget. Write down your monthly income. Then write down your necessary fixed expenses, such as your rent/mortgage payment and insurance payments. Then write down your variable expenses, such as your credit card debts, grocery expenses and what you spend on recreation and entertainment. The Credit website advises paying attention to the areas in your variable expenses column that you can shave down. For example, you may need to curtail all recreation and entertainment for a while. Take the extra money that you have left over at the end of the month and apply it to the store credit card debt you are trying to pay off. Do this for as many months as necessary until the balance is at zero.
Step 5
Rather than shuffling your account balances around by putting them on a lower-interest major credit card or taking out a consolidation loan, consider your no-risk options. Look for things that you can sell to pay down your store card debt. Consider getting a roommate to reduce housing costs. Give your income a boost. While it is never pleasant to spend your weekends working a second job, sacrificing your free time for a brief period of time is better than sinking further into debt and risking the chance that your accounts will be handed over to a collections agency or charged off by the credit card issuer--this can wreck your credit history for seven years.
Tips and Warnings
- The key to any successful do-it-yourself system of paying down debt is simple--while you are paying off any type of credit card debt, do not incur new debt. Do not be afraid to get help, advises the National Foundation for Credit Counseling. A reputable credit counselor can help you dig your way out of store card debt by devising a better budget. If you have a large amount of credit card debt, other programs (such as a debt management plan) may be recommended.
- If you do not trust yourself not to use your store credit cards, cut them up or freeze them in ice. Do not close the accounts, advises the Credit website. Closing your accounts negatively affects your credit history.
Things You'll Need
- Computer
- Personal accounting software
- Ledger
- Pencil
- Calculator
Member Comments