How to Terminate All Credit Card Debt
Dependency on credit cards is a big problem in America. The average family owes $8,000 in credit card debt, according to the American Bankers Association. Making the minimal monthly payments on your credit cards won't help you get out of debt---and you'll end up spending a lot more money in the long run. By developing a well-thought-out plan and following a few basics of money management, you can terminate your credit card debt and move down the path to financial freedom.
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Instructions
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Compile your credit card statements and map out your debt. Create a spreadsheet with four columns: credit card company, outstanding debt, interest rate and minimum payment. The credit card with the least amount of debt should be at the top of the list, while the credit card/creditor with the highest amount of outstanding debt should be placed at the bottom of the list. If two credit cards share the same amount of debt, list the card with the higher interest rate first.
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Begin paying off the credit card with the least amount of debt first, while continuing to make the minimum payments on the others. This approach was developed by financial planner Dave Ramsey and is known as the Snowball Effect. By paying off the smaller debts first, you'll get closer to a debt-free lifestyle. Each successful payoff will give you the momentum you need to tackle a larger debt.
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As each account gets paid off, make sure it gets closed, too. You can't truly terminate credit card debt if you continue to borrow against the same accounts. Cancel all accounts once you have paid them off.
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Tips & Warnings
Consider contacting your creditors directly and asking them to work with you to reduce your debt. Often times, creditors will renegotiate your payment terms if you can demonstrate a hardship. Don't wait for the account to be turned over to collections --- that's a sign that your creditors have given up on you.
Make sure you have about $1,000 in cash saved up in case of emergencies, and don't forget to stop making the same lifestyle choices that got you into this mess in the first place. Out-of-control spending and living past one's means is often the number-one cause of credit card debt.
