How do I Work on Getting Out of Credit Card Debt?

Credit card debt can grow quickly if not consistently monitored.

Credit cards can be a useful financial tool that allow you to defer payment for purchases. However, some people allow their credit card purchases to get out of control and end up owing far more than they can actually pay back. These people must carefully evaluate their current position and determine a way to get out of credit card debt. The steps for getting out of credit card debt are basic if you consistently follow them.

Things You'll Need

• Scissors

Instructions

1. Get all of the credit cards you own and lay them on a table. Call the customer service number on the back of each card and write down the total balance on each card as well as the interest rate for each card.

2. Cut up all of the credit cards with a pair of scissors, except for the one with the lowest balance. Place the one remaining credit card in a location at home that makes it difficult to take it with you while shopping.

3. Rank the cards from the lowest balance to the highest balance. If desired, you can choose to rank the cards from highest interest rate to lowest interest rate.

4. Call customer service for the credit cards with the lowest interest rates and ask them if you qualify for a balance transfer deal. If so, transfer the balance from the highest interest rate cards to the lowest interest rate cards. This helps you pay off the debt faster since your interest amounts are reduced.

5. Ask the credit card companies to reduce the interest rate on your card and they might just do it. Remind them of how long you have been a customer, if it has been longer than a year. In addition, if you have never had a late payment, remind them of this as well since this increases your chances of getting the rate lowered. If you have had late payments, it is unlikely they will lower your rate.

6. Pay the minimum balance on all of the cards each month except for the one with the lowest balance. On the card with the lowest balance, pay the minimum balance and any extra that you can come up with. If you are paying off debt by the highest interest rate, apply the larger payments to the card with the highest rate first.

7. Continue using this payment method each month until you pay off the card with the lowest balance or the highest rate depending on which method you choose. Then, apply the larger payments to the credit card with the next lowest balance or the next highest rate.

Tips & Warnings

• Paying off the card with the highest interest rate first saves the most money in interest charges. However, some people find it difficult to stay motivated using this method and prefer to pay off the smallest balance first so they feel they are making progress.

• If your credit card debt is extensive, consider getting a part-time job until you pay it off.

• To further reduce your credit card debt, pay down the debt every time you get any extra money, such as a tax refund or a work bonus.

References

• Frugal Dad: "Getting out of Credit Card Debt"
• The Motely Fool: "60-Second Guide to Getting out of Debt"