How to Get Out of Credit Card Debt
In the US alone, nearly one-third of the population carries a revolving credit card debt. Around the world, credit card debt is a major source of financial hardship for many, and this often translates to low credit scores and astronomically high lending rates.
Living free of debt should become part of your financial blueprint and help you make wise choices about money. With a structured, discipline approach, you can realistically wade out of the shores of debt into clear waters. Here’s how.
- Know what you owe. Take stock of exactly how deeply in debt you are. On a piece of paper, write down the debt and interest rate on every card you own. Acknowledgment is the first step toward overcoming failure.
- Stop using your credit cards. Getting out of debt requires taking those credit cards out of your wallet or purse and stashing them far out of reach and mind. Learning to pay for your purchases in cash instead of on credit will make you more thoughtful about your spending, distinguishing need from want and thinking twice.
- Overhaul your budget. You’ve got to eliminate unnecessary expenses. Make note of three ways you can immediately cut back, and cancel or downgrade some of the services you subscribe to, like cable TV or a gym membership. Here’s another tip: Making your own coffee instead of swinging by Starbucks every morning could well add up to over $1,000 a year!
- Select a payoff approach. The fastest way to lower your debt is to pay off your highest-interest card first while forking over the minimum payments on the others. Once the first card is zeroed, apply all the cash to the card with the second highest interest rate, and continue this pattern until you’re liberated from debt. The second method is to pay off the card with the lowest balance while continuing to pay the minimums on the others. Perhaps not the most cost-effective measure to banishing debt, it’ll boost your confidence knowing you’ve already made a stride!
- Educate yourself, and stay focused. Scour the Internet for personal finance blogs and forums where you can chime in on the debt discussion. Keep your goals at the fore of your mind, or better yet, commit them to a paper note and stash it in your purse or wallet. This will help you become contemplative of every purchase.
- Track your progress. Every month or so, revisit your progress. Assess what worked and what didn’t. Reining in your debt isn’t a walk in the park, but once you’ve made it, the taste of victory is sweet. You can finally start putting the money toward things you really care about!