Significance

• Accepting debt and only paying the minimum each month may seem acceptable to you. Regrettably, carrying high debts month-to-month or year-to-year can take a toll on your credit score and reduce your chances of getting a mortgage loan. Being debt-free or carrying a small amount of debt looks good on finance applications, and the less debt you hold, the better your credit rating.
  
  

Effects of Payments

• The amount you choose to pay towards your debt each month determines whether you'll become debt-free. Credit cards ask for a minimum payment, which is a small percentage of your balance. A credit card with a $2,000 balance may only request a minimum payment of $40 a month. This is hardly enough to reduce the balance, and you'll pay several hundred dollars in interest charges. Upping your minimum payments each month helps bring down the principal and allows you to reduce the debt quicker.
  
  

Benefits of a Lower Rate

• A high credit card interest rate can block your attempts to get rid of debt, especially if you're only able to make the minimum payment. Credit cards charge interest monthly. After making your minimum payment, a percentage of your payment goes to the interest, and the remaining percentage goes to paying down the principal. Lowering the interest rate on credit cards results in credit card companies applying more of the payment to the principle. Make slightly higher payments each month, and you'll notice a drop in your principal. Call your company and ask them to considering lowering your rate.
  
  

Prevention/Solution

• Adopting the "cash is king" mindset protects you from excessive credit card debt. Using a credit card when you're occasionally short on cash isn't a bad thing, as long as you resolve to pay off the charge in full. Stop using credit cards while implementing strategies to reduce your debt.
  
  

Expert Insight

• According to Key Bank, debt counseling is a good solution for people who are unable to reduce debt and manage credit on their own. Non-profit agencies do not charge a monthly fee for their services, and their experienced credit counselors will contact your creditors and workout new terms for your credit cards. This includes better rates and a new payment schedule.