Do you have credit card debt? Are you paying the minimum payment every month? If so, you have probably realized this won’t get you anywhere fast with your credit card debt.
Do you pay more than the minimum payment on each card each month, hoping it will eventually add up to enough and you’ll be out of debt? This method will work, but it will take a long time.
The information in this article can help you get out of credit card debt much faster than the two options listed above.
- The first thing you need to do is resolve not to use the credit cards you have. This is a hard thing to do, but if you ever want to get out of debt, you have to be disciplined. The discipline starts with not using the cards. Put them in your safe or filing cabinet at home and don’t carry them with you.
- Call all your credit card companies and ask them if you can get your interest rate lowered. A lot of credit card companies have options for lowering your interest rate, you just have to ask. If they tell you they cannot lower your interest rate, that’s okay. You can still follow this plan, but it doesn’t hurt to ask!
- Work out your budget. Set a monthly amount that you will dedicate to paying on your credit cards. It needs to be about $50 to $100 dollars more than the total of all the minimum payments due on your cards. For example, if you have 5 credit cards and each card has a minimum monthly payment due of $35, the total of all these minimum payments is $175, so you would need to budget at least $225 to $375 per month.
- Start with the card that has the lowest balance on it. If there are some cards that have the same balance, pick the one with the highest interest rate. This is the card you will pay off first.
- Pay the minimum payments due on all your credit cards, except the one you have chosen to pay off first. On your chosen credit card, you pay the minimum plus the extra amount ($50 to $100) you have budgeted. If you can’t afford the extra $50 or $100 each month, pay any extra you can. Even an $20 extra will help. Keep in mind that the more you pay, the quicker that balance will be paid off. Ideally, you should see if you can find ways to save money each month in order to pay more on your chosen credit card each month. Use coupons, take your lunch to work, walk to work or take public transportation, anything you can do to reduce expenses will certainly help.
- When the first credit card you chose is paid off, close the account with the lender. You don’t need it any more and you don’t want to use it. Make sure you shred it, cut it into pieces, or return it to the lender if required. Some banks will shred cards for you for free if you have an account with them. Under no circumstances should you throw away the card intact, make sure you shred or cut the card up before discarding it.
- Congratulations, you now have one less credit card account. Out of the credit cards that are left, again choose the one that has the smallest balance. Having one less card, you now have more money to apply to the remaining cards. In the example above, if you had budgeted $225 dollars to go towards your credit card debt each month, you still have $225 to apply toward your credit card debt, but now you have one less card. Now you have 4 credit cards with a $35 minimum payment each, or a minimum monthly payment total of $140. You have budgeted $225, so that leaves you $85 extra dollars each month to apply to one of your credit card accounts. This card will be paid off much faster than the last one because you are going to be paying more off it every month.
- Continue paying off one card at a time and using the extra money to apply to the next card until all cards are paid off. Make sure to close each account after it has been paid off so you are not tempted to use the cards again.
Getting rid of your credit card debt is not easy and depending on how many cards you have and how big the balances are, this could take a few years or more to clear it all up entirely. If you stick to this program, don’t use the cards to buy anything, and close the accounts when they’re paid off, you will be relieved of your credit card debt before you know it.