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These days, millions of consumers are dealing with large amount of debt spread across their mortgages, student loans, auto financing and credit cards.

Credit card debt can cause major problems for consumers who are not fully accustomed to handling it responsibly, especially if they are trying to pay down other debts as well. That’s because between interest charges and penalty rates and fees that will be added to their account if they miss a payment, any misstep will likely cost them a large amount of money.

One mistake many people who are juggling many kinds of balances make related to credit card use and repayments when their bill comes every month is contributing only the minimum payment into their debts. This total, listed on their monthly statement, will certainly keep the account from falling into delinquency, but will keep their debt at elevated levels. The best way to avoid this problem, therefore, is to make the largest payments they can afford into their outstanding balance every month.

This will be extremely beneficial in reducing the debt they owe because new federal laws dictate that any contributions to a credit card balance made above the listed minimum payment will be applied directly to the loan principal. This means that they won’t just be chipping away at interest charges, but rather reducing the amount they owe so that they are charged less interest going forward.

Once they understand this, recent college graduates should take the time to work out a debt repayment schedule based on what they currently owe on any existing cards they may have. During this time, they may also want to avoid adding any additional charges to their account so that they are only reducing the amount they owe. When they know how much they can reasonably afford to pay into their credit card debt every month, they will be better equipped to do so and perhaps even start spending more wisely.

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It can be difficult for borrowers to get a handle on their debt totals when they use their credit cards often, but taking a reasoned approach to these balances, and seeing how they affect all aspects of one’s finances, can be extremely beneficial. When trying to reduce these balances, consumers should always try to tackle the accounts with the highest interest rates first.

Image: Eliazar Parra Cardenas, via Flickr

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