Given our propensity to live vicariously through our credit cards, it’s no wonder that living well beyond our means suddenly catches up with us. If you find yourself mired in mounting credit card debt, don’t panic. There are solutions to get out of credit card debt. The first and most important decision you must make is to end your reliance on credit. The next step is to put a plan in motion to eliminate credit card debt for good. This situation didn’t materialize overnight and it won’t be solved in a day. However, in time your debt will be reduced. So, how does one get out of credit card debt?
Cut Up Those Cards!
Want to stop buying on credit, but can’t seem to kick the habit? Then cut up your credit cards. It’s that simple. However, do not call the credit card company and put a hold or cancel the card before you’ve paid off your balance. In some cases this can adversely affect your credit rating. What you want to do is to eliminate the source of your pain and cutting up your cards will force you to live within your means.
Attack the Smallest Balances First
One of the biggest mistakes individuals make is to pay off the minimum monthly amount on all their cards. What you want are victories, even if they’re small ones. While a number of financial advisers advocate paying off the highest balances first, we’ll leave those higher balances for the next point. For those smaller balances, pay them off as soon as you can. Once you’ve cleared them, close the account immediately. Paying off a small credit card balance and closing it is much better for your credit rating than simply paying off the minimum balances on a bunch of credit cards.
Use Debt Consolidation Loans
Take your largest outstanding balances and use a debt consolidation loan to amalgamate that debt into one large sum. In some instances, debt consolidation loans can reduce your interest rates by 40% or more. The benefit is that you’ll no longer be paying off minimum balances, only to see those payments swallowed up by those aforementioned high interest rates. Instead, with lower interest rates through a debt consolidation loan, more of your money will go towards paying down your actual debt.
Making a decision to end your credit card debt is the first and most important step. Ending your reliance on credit might just involve you cutting up your cards. If you’ve become so reliant upon credit, it’s because you’ve become accustomed to the flexibility of pulling out your credit card whenever it tickles your fancy. Eliminating that urge sometimes takes drastic measures. Next, pay off your smallest balances owing. It will improve your credit rating and give you a sense of accomplishment. Finally, amalgamate your debt into one large debt consolidation loan.
Author Bio: This article was written by Jane Sanders from Debt Management. Check out her site to get more tips for eliminating debt like creating a credit card debt management plan.
or you can get a credit card with a lower interest and transfer that balance over. Then pay it off as quickly as possible.
All great points. I would also consider balance transfers the larger amounts to save on the intrest as well as set yourself mini goals with small reward for completion or the task may become to daunting.
I’m an ex-banker & I quickly learned that debt consolidation loans rarely benefit debtors. The loans usually only delayed rather than resolved the underlying problem. The underlying problem was poor spending / saving habits. Until the habits are changed the eventual outcome remains the same.
Great checklist! The only thing I’d add is to work on a big attitude adjustment toward wants vs. needs, and learn to say “no” to yourself. Debt repayment seems to be about 99% discipline! Thanks for a good post.
I don’t agree when you say Use Debt Consolidation Loans. It will just trigger more debt. You should repay your loans as quickly as possible
Maybe everyone is not understanding debt consolidation loans. This means that you’d take out a loan at a MUCH lower interest rate than the 19.99% on a credit card, then use that loan to pay off your credit cards. It’s not adding more debt, it’s just swapping out CC debt with cheaper debt to repay. Makes perfect sense to me.
In an ideal world a debt consolidation loan does make perfect sense. But this article doesn’t point out one of the big dangers in these loans — if you got yourself into trouble in the first place charging everything in sight, there is nothing to stop you from running up the cards again once you consolidate the balances. Here is a link to pretty good post about a real couple who ended up in bankruptcy a couple years after taking out a loan:
http://www.solvingdebt.ca/blog/how-stay-out-trouble-credit-card-debt-consolidation-loans