How to Get Rid of Credit Card Debt
Is your mounting credit card debt keeping you up at night? Are you wondering how you’re ever going to get rid of it? Credit card debt can be extremely stressful. And trust us, you’re not alone in the stress you’re feeling. Currently, the average American household has $8,377 of credit card debt. This is a 6 percent jump from what it was last year. So clearly, you’re not the only one who needs know how to get rid of credit card debt, so we are here to help you sort it all out.
But, stressing out about your credit card debt isn’t really going to get you anywhere.
To get rid of your debt, you need to start taking immediate action.
Let’s take a look at what you can do to get rid of your debt:
1. Understand How You Got Here
That little piece of plastic can be your best friend and your worst enemy.
Credit cards are great for emergency situations, making large purchases, and building your credit score. But, for many, swiping a credit card is too easy. Out of control spending can quickly land you in a deep pile of debt.
Before you set forth a plan of action, it’s important to understand how you got into debt in the first place. Was it poor budgeting? Was it reckless spending at the bars? Or was it a couple large purchases that you kept forgetting to pay back?
Whatever the reason, you need to figure it out so you can take steps to kick the habit in the future.
For example, if you’re a big spender at the bars and always buying drinks for your friends, it may be a good idea to take out some cash and leave the card at home for your next night on the town.
Funny Family Guy Video About Credit Card Debt
2. Get Organized
Getting organized will help you set forth a plan of action on how to get rid of credit card debt quickly.
For every card that’s carrying a balance, gather all the credit card information. Make a spreadsheet detailing important information about each card: interest rates, balances owed, due dates, and minimum payments.
This will help you focus on which debts need to cut out first. It will also help you figure out how much money you need to set aside each month for payments.
3. Set a Budget
Once you’ve compiled what you owe in minimum monthly payments, it’s time to set a budget.
Even if your budget is pretty tight already, you’ll marvel at how many ways there are to cut back on your spending.
Here’s just a few to get you started:
- Cut back on dining out
- Downgrade your cable
- Go easy on the AC
- Stop buying unnecessary luxuries
- Use coupons
- Walk places instead of driving
4. Figure out Your Strategy
There’s not a one-size-fits-all strategy on how to get rid of credit card debt. The strategy you choose will depend on your own individual needs.
Let’s take a look at some of the best options:
Pay off the Lowest Balance First
Are you the type of person who loves crossing things off your to-do list?
If so, paying off the lowest credit card balance may be the strategy for you. This is a great way to gain some momentum and see a quick payoff for your hard work.
Plus, knocking off one credit card payment means one less minimum monthly payment you need to worry about. This will allow you to then shift your focus onto those larger balances.
Consolidate to a Single Card or Loan
If keeping track of a bunch of different payments every month is stressing you out, you may want to consider consolidating your debt.
This will allow you to focus on one big number instead of a bunch of smaller ones.
Pro tip: Many balance-transfer cards offer 0 percent interest periods. This can be a great way on how to get rid of credit card debt without incurring any extra charges.
Pay Off Card With Highest Interest
This one’s pretty straightforward: take a look at your spreadsheet and find the interest rates associated with each credit card.
Whichever one has the highest interest rate (also known as annual percentage rate or APR) gets paid off first. Of course, you’ll still be making minimum monthly payments on your other cards.
From a monetary perspective, this strategy makes the most sense. This is because it’s the quickest way to cut out spending on the highest interest rate.
To implement this strategy, you’ll need to boost your monthly payments on this card. Try to pick a boosted payment and stick to it. Easing up on your payments near the end will only prolong things.
Once you’ve picked your payment strategy on how to get rid of credit card debt, it’s time to get cracking.
Ask for Lower Interest Rate
Cutting down on interest rates can save you big money in the long run.
Take time to call each one of your credit card companies and request a lower interest rate. If a company does give you a lower interest rate, make sure you ask all of your competing cards to match it.
It’s definitely worth a shot. According to one study, 78 percent of people who asked for a lower-rate received one.
Also, if you have a good credit score, make sure to mention that as well, as that can work in your favor.
If your biggest struggle is remembering to pay your balance, then you need to set up automatic payments.
That way, you never have to think about the money leaving your checking account.
Large credit card debt doesn’t just happen, it happens because of careless spending habits.
While paying off your debt, it’s best to leave your card at home. Instead, use cash so you’re not tempted to fall back into old ways. You could even ask a roommate or a friend to hide the card for you until you know you can control yourself.
Don’t Close the Card
But, whatever you do, don’t close the card!
It may seem like a good idea to prevent yourself from making unnecessary purchases, but closing your card can actually hurt your credit score.
Your credit score is affected by the total length of your credit history, so you need to leave the card open to maintain that length.
Watch This – A Short Report On The State Of Credit Card Debt In America
Credit Card Debt: Wrap Up
Getting your debt under control is no easy feat. But as you can see, it’s a pretty straightforward process once you’ve got a plan in place.
Please let us know if you have any questions about credit card debt in the comments below.
Also, if your credit score has taken a hit from all this debt, be sure to check out our advice on how to improve your credit score.
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