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How to Get Out of Credit Card Debt

Posted by: Staff Writer | May 22,2008

Credit Card Debt

 
Most everybody is in some form of credit card debt.  Financial advisors say that the best way to use credit cards is to pay off the balance in full every month.  This is not quite realistic because if a person could afford something at the time of purchase, he or she would likely use debit or cash.  Credit cards are most often used to buy things that a person could not afford immediately.  What this means is that most credit card users are carrying a balance.  

Everyone’s debt situation is going to be slightly different.  Maybe you have a mortgage to pay, maybe you don’t.  Maybe you have student loans or maybe you are close to retirement.  These tips are a general look at how everyone can tackle problems with credit card debt. 

Tips for Getting Out of Debt

1.    Budget.  Go over your monthly expenses with a fine-tooth comb: every expense, down to every cup of coffee.  See if there are any expenses you can cut out.  This extra money can be used to pay off your credit card debt more aggressively.  
2.    Line up all your credit cards.  Rank them according to interest rate.  You want to pay off the card with the highest APR first, as this card will cost you the most money in the long run.  
3.    Contact your credit card company and see if you can lower the interest on your cards.  Normally, this can only be done if you have a good, long-standing payment history.
4.    In addition to Step 3, get a balance transfer card with a long-term introductory 0% balance transfer rate.  Don’t use this for purchases – only use it to pay down debt.  
5.    Don’t pay the minimum.  This has a two-fold use.  First, it ensures that you’ll pay more of the balance every month, but also, it gives you negotiating power if you do Step 3 at a later date.  Weight the largest payment for the card with the highest APR.
6.    Stop spending on credit.  Give yourself a credit diet.  You can’t cut down on your debt if you’re adding to it every month.   
7.    Use savings to pay off debt.  This may seem contrary to logic, but even a small amount of debt can stay around for years into the future.  You want to be out from under the burden of debt as soon as possible.  

Another couple of steps could be added that are more emotional: be patient and diligent.  Don’t expect any overnight success with paying off debt.  Depending on your particular situation, it can take years to effectively pay off debt.  Determination is key and you’ll soon see your debt balance heading in the right direction.  Keeping an accurate ledger of all your expenses and payments can help accurately assess your debt situation, as well as  illustrate your progress.

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