How to Climb Out of Credit Card Debt
Credit card debt isn’t uncommon. In fact, more than 41% of households have some sort of credit card debt, which averages out to about $5,700. From Georgia to the northernmost states and all the way to the west coast, debt is a serious problem; but what do you do if you’ve amassed a large amount of debt?
Credit card debt is costly, especially if you’re only making the minimum payment. If your credit card terms are like most cardholders, you’re stuck paying a double-digit interest rate, which means hundreds, possibly thousands of dollars is paid towards interest.
The good news is that it’s possible to climb out of credit card debt. It does require a solid budget, self-discipline, and persistence.
Here are tips and tricks to start paying down your debt.
Assess Your Financial Situation
The first thing to do in your venture to pay off debt is to assess your financial situation. Make a list of all of your financial data including your monthly income as well as your expenses. When notating expenses be sure to list things, such as:
- Credit card payments
- Monthly bills
- Other expenses
When examining your credit card debt, there are other details you’ll want to include. Write down the balance on each credit card as well as the annual percentage rate (APR).
Knowing these numbers will make it easier to determine which debt you should pay off first. For example, if you use the snowball method, you’ll want to pay off the smallest debt balance first, and then move to the next largest balance.
Prioritize Your Spending
Once you’ve written down all of the details of your income and expenses, it’s time to prioritize your spending. This includes making note of how much you must spend on housing, food, clothes, and gas.
Next, look at your secured debts, such as your mortgage or car. These are payments that you must make in total and on time; otherwise, you risk losing the asset.
Add up all of these expenses and then subtract them from your total monthly income. With this number, you can then figure out how much you can afford to pay towards each of your credit card balances.
As a rule of thumb, you always want to make at least the minimum payment for each card, but paying more is always ideal. If you want to use the snowball method, you’ll want to pay as much as you can on the smallest debt balance, and then move those payments to the next highest balance.
Consider Debt Consolidation
Do you have a solid credit score and credit history, but feel overwhelmed by your credit card payments? If so, consider consolidating all of your debt balances into one.
One option for debt consolidation is to get a 0% balance transfer credit card. Though it may seem silly to apply for a credit card when the goal is to get out of credit card debt, a 0% balance card will save you a lot of money.
There are many cards on the market that have a 0% introductory period, most lasting anywhere from 15 to 18 months. This gives you at least a year and three months to chip away at your debt balance without paying a penny towards interest.
Another option for consolidating your debt is to open a fixed-rate personal loan. While you’ll have to pay interest on a personal loan, loan interest rates are typically much lower than those offered by credit card companies. This can save you a lot of money over the course of the loan.
Talk to a Professional
Coming up with a plan to get out of credit card debt can be daunting. By working with a professional, you can not only work to pay off credit card debt, but you’ll also be able to improve your entire financial situation. With the help of a financial advisor, you can create goals and a path to meeting them.
Unsure of where to get professional financial advice? You can compare the best financial advisors on the Careful Cents site. A financial advisor will help you to not only pay off debt, but also create a plan for making your money go further.
You can even work with an advisor to make smart investing decisions, such as planning retirement or just putting money into the stock market.
Work With Your Lenders
Depending on your credit standing and your payment history, creditors may be willing to negotiate payment terms with you. If you have a history of making payments on time and paying at least the minimum payment due, you may be able to lower your monthly payment or lower your APR.
Call your creditors and explain your financial situation. The worst that can happen is that they say no.
Getting out of credit card debt requires careful budgeting and smart spending. With these tips and tricks you can reduce your debt load and better your financial situation