Many find it difficult to reduce credit card debt yet it need not be. When used properly, credit cards can be an extremely useful service, but never forget that this is a business, not a free service. Credit card companies rely on the interest you pay in addition to the charges applied to those that accept them, in order to make money.

If you pay only the minimum amount each month, you will likely never clear your balance. You eventually should theoretically, but you will likely be tempted to use the card again before clearing what you still owe. Having credit cards will improve your credit score, but your credit to utilization ratio should be low in order for it not to eventually affect your FICO score.

To reduce credit card debt, it is important that you first understand exactly what that is. Check all your cards and establish your current balance with each of them. Having done that, here are some tips to reduce what you owe:

1. Improve Your Interest Rates and Debt to Credit Ratio

Depending on your card, you can be paying from 15% – 30% interest each year. Check out the interest rate you are paying on each of your cards, and transfer as much of the balance in these accounts to lower rate cards. If you want to reduce your FICO score, then do that without taking out any new cards.

Call your current card providers and ask them for a reduced rate. Most want to keep you as a customer, so you might be successful. Also, redistribute your debt between your various cards. It is better to owe smaller amounts to multiple card companies than a large sum to only one or two. Your credit utilization ratio, or debt to credit ratio, is better that way, and your FICO score will not be adversely affected. Try to keep your debt on any individual card to below 25% of your credit limit for that card.

Many financial advisers will recommend you cancel the cards you have paid off, but think carefully about that. Get a second opinion, because many also believe that you would be better to keep old cards active in order to reduce your overall credit to utilization ratio. What you should not do is open up a new card: the credit search carried out will be recorded on your credit records, and additionally, cards without an established history of repayment will count against you.

2. Establish a Sensible Repayment Strategy

The most effective way to pay off your debt is to clear those cards with the highest interest rate first. Some people may prefer to pay off one or two cards with the lowest balance to get quick success and boost their confidence. While doing this might be a good incentive to keep going, it is not the best option financially. However, if you have seven cards, say, and two have only a few hundred dollars due between them, then it might help you psychologically to pay these off first while paying the minimum on the others.

Whichever course you take, you should write down your repayment plan and stick to it. Understand the minimum payments for each account, and also how much in total you can repay each month. Deduct the total minimums from what you can afford, and the balance will be the extra you should be able to pay to the highest interest cards. Either focus on the one that charges most interest, or initially pay that sum to those cards with the lowest balances as explained above.

3. Minimize Your Credit Usage

Not only should you maintain your repayment policy, but you should also put your cards into cold storage. Studies have shown that people who purchase by card will generally spend a lot more when they shop than those that pay cash. Work out how much you afford for your Christmas shop, and take that cash sum with you.

If you need the security, take only your lowest interest card with you and pay the entire debt when the bill comes in. It doesn’t make sense to work out a repayment policy to reduce your credit card debt while you are still routinely using the cards! There is also a fourth tip if you want to consider it:

Reduce Credit Card Debt: The Refinance Option

Another option is to remortgage your home for sufficient to either reduce your credit debt to below 25% of your combine credit limit or even repay it all and start with a clean sheet. Your refinance interest rate will be way below your credit card interest rates. For example, your credit card could charge an APR of 23% while you can likely get a remortgage deal for below 6%.

Yes, you could lose your home if you fail to maintain repayments, but you should find it easier to do so than repay a credit card at 3-4 times the interest rate. If in doubt, take the advice of a mortgage advisor as to the best way for you to reduce credit card debt.