Guide to Eliminating Your Credit Card Debt
Written by Gloria Zhu   

It is interesting to see how little plastic cards can be such a blessing and curse. Credit cards make purchasing so convenient; but it is also convenient to fall into debt. According to the Federal Reserve, 58% of households carry a balance. So be the other 42%--take the time and eliminate that debt!

Step 1: Freeze Your Cards!
This may be hard, but stop excessive spending and avoid using your credit card. If you have two credit cards, cut up the one with the largest balance, and keep the other for emergencies only.

Step 2: Set Up A Budget and Total the Minimum Payments
When you create a budget, you realize how much wasteful and unnecessary spending you engage in. By organizing your spending, you can cut down on excess costs without much effort. Organize payments of what you need wisely such as mortgage or rent, utilities, food and insurance. These usually take up the bulk of most household budgets. Also, order the cards on the list so that the credit card with the highest interest rate is at the top, and the lowest is at the bottom.

Step 3: Use Cash Rather Than Credit Cards When Possible
People have an attachment to cash but do not apply the same value assessment to cash substitutes. For example, that is why casinos give their customers chips instead of allowing them to play with money. It’s the same with credit cards.

Step 4: Get a Better Rate
If you have thousands in personal debt, it will help your monthly cash flow if you are able to transfer those balances onto a low interest or 0% APR credit card. However, be wary of these because the better the deal, the more possibility there is for hidden costs. You can learn more in the article Costs Associated with Credit Cards.

Step 5: Use Any Earned Money to Eliminate Your Debt As Fast As Possible
As the due date of your payments approaches, pay the minimum on each card except for the one at the top of your list. Remember, the highest interest rate costs you the most money when you maintain a balance. So whatever additional money you budgeted in the previous step, apply that to the highest interest rate card. Basically, apply all extra cash to the debt with the highest interest. Although it takes time and effort, you must live within your income, establish a budget, pay cash and look for better interest rate terms on your credit card. 

Tips: Look For Credit Card Consolidation.  This means moving the balance from your high interest credit cards onto a single card with a lower interest rate.

Keep in mind that this process takes time. There is no magic method of paying off debt, so realize that it will still take months or even a few years to become completely debt-free. But what we're doing is putting a process in place to make sure that you can get out of debt as soon as possible. You can speed up the process if you continue to pay even more money towards your debt as your budget allows.
Last Updated on Wednesday, 16 February 2011 13:54