Ryan Guina is a personal finance and career blogger who can be found at Cash Money Life and around the web.
Credit card debt is nothing to be ashamed of – it happens to the best of people. But it’s nothing to be taken lightly either. There is only one solution for credit card debt and that is to eliminate it forever, and never let it creep back in to your life.
I know what you’re thinking, “But it’s so much! Where do I even start?”
Well, those are normal thoughts, and thankfully, we have a plan that can help you stop using credit cards and start living without debt. Let’s go step by step, and with some hard work and dedication, you can not only kick the credit card habit, but begin living debt free and start saving and investing for the future. Trust me – you want compound interest working for you, not against you!
Face the music and make the commitment
The first step is to clear the table, gather your bills, and sit down for the reckoning. Grab a sheet of paper and a pen, gather your bills and list out each creditor, the total amount owed, the minimum payment, and the interest rate. We will use this information when we come up with a plan to repay your credit cards more quickly than you thought you could.
This exercise forces you to look at the total amount of credit card debt you owe in one place. The total amount you owe may surprise you. Use that as motivation to make the commitment to no longer use credit cards. Cut them up, freeze them in a block of ice, put them in the blender – whatever it takes to keep you from adding on credit card debt.
But I NEED my credit card!
No you don’t. You think you need your credit card.
If you need to make payments online then get a rewards debit card so you can continue earning cash back, but you are only using money you have in your account at the time. Trust me – if you don’t have it, you can’t spend it.
Come up with a plan to kill the debt
The next thing we need to do is come up with a plan to eliminate your credit card debt. Minimum payments won’t cut it. If you try getting by with minimum payments it will take you 5 years on average to pay off your existing loans, and that is assuming you don’t make any more charges.
Instead we will look back at the spreadsheet we made in the first step and your budget (you do have a budget, right?). Determine how much you can pay each month and subtract the minimum payment from each card from the amount you can pay. Hopefully you have some extra money left over. Direct those additional funds to the credit card that has the highest interest rate. That will reduce your principle the quickest and save your the most amount of money in the long run. repeat this process until all credit card debt has been eliminated. It is a simple concept, but very effective.
Advanced credit card debt elimination tactic. If you are looking for an advanced credit card debt reduction tactic, then consider using a 0% balance transfer credit card, which allows you to transfer your credit card balance to a new credit card account at a 0% interest rate. The benefit to doing this is that 100% of your payment will go toward reducing your debt instead of paying interest to the credit card company. Why is this an advanced tip? Because you will need to open a new credit card to take advantage of this offer. Just follow this 0% balance transfer guide for step by step instructions – and remember, don’t use the new credit cards for new purchases, just to reduce your interest rate!
Use extra money
Another way to put your credit card debt reduction on hyperdrive is to use any additional funds that come your way. A great example is the tax return you may be expecting soon. Sure, you might have wanted to buy a nice large screen TV with that money, but trust me, you’ll be better off directing it toward credit card debt. Also consider using extra funds from bonuses, side jobs, and other means.
These methods will help you reduce your credit card debt more quickly than you thought possible and set you on the path toward financial freedom.