Credit card debt can can turn into a vicious cycle. Landing in debt is often unplanned, and once you’re in over your head, getting out can feel impossible. With interest rates as high as 30%, paying the minimum means taking years or longer to wipe out all the charges.
If you end up in credit card debt, paying it off is going to take effort and dedication. Here are steps you should take to find your way out of debt.
1. Stop Using Credit Cards
Trying to keep using credit cards while your aim is to pay them all off is a misguided plan. Whether you’re having trouble managing your spending or your income isn’t sufficient to pay your balances, continuing to spend on credit cards will never make the situation better.
No matter what you believe about the benefits of credit cards, you must consider giving them up for your plan to succeed. There’s no need to close your credit accounts and risk credit score damage, though. Instead, take the credit cards out of your wallet and store them out of sight. If that’s not enough, cut them up to literally make them impossible to use.
2. Adopt a Plan
When you’re attempting to pay off all your credit card debt, having a plan to follow is the best place to start. Yes, planning is a pain and might not be your “thing.” But don’t forget: lack of planning might be the reason you’re in this mess to begin with. Don’t let your past failures continue into the future by failing to correct them. Creating a system that works means there’s less room for error or second-guessing.
Creating a plan doesn’t even have to be hard. There are already models out there that are proven to be effective.
For actually paying the debt, the Debt Snowball method works wonders for many. It’s easy to follow: just line up your debts from lowest to highest balance. Then pay off the entire smallest balance first before moving on to the next account. Focusing on just the one account at a time, and make minimum payments on the other cards as you work to pay them all off.
You can also try using free software like Ready for Zero. You’ll be able to import account information and get calculated advice on how to most effectively pay down accounts and save the most money.
3. List Your Motivations
If you’ve been thinking about working your way out of credit card debt, there’s likely a reason behind wanting to do so. Are you sick of feeling broke all the time? Are you stressed out by the constant letters and calls you’re getting regarding your debt, and it’s keeping you up at night?
Think and reflect about what your “why” is for getting yourself out of debt. Write your reasons down and post reminders on your refrigerator and in your wallet. Nothing will be more motivating that finding real, personal reasons to get serious about paying off debt.
4. Get Serious About Making Payments
Remember that part about creating a system? Making regular payments is an important piece to that.
The easiest way to pay down debt is to set up automatic payments online that deduct after each of your paychecks is deposited. This means linking a bank account directly to your credit account online and setting up auto-payments so you don’t have to remember to do it manually.
Whether you’re paid weekly or biweekly, set up the payments to coincide with your paydays. This forces you to do pay your debt first rather than waiting until the end of the month and hoping you still have enough in the bank to cover all your payments.
5. Transfer Balances to Zero Interest Cards
If you’re able to find a credit card offer that will allow you to transfer balances and pay no interest, doing so can save you some cash and help you achieve your debt-free goal much faster.
Zero-interest offers are often readily available, especially if your credit score is excellent. Basic credit card research should turn up several options that you can compare.
Just remember that you’ll likely pay a fee to transfer balances, so it’s not something you want to do continually. Watch out on your credit card terms sheet for expiring zero interest periods since you’ll likely be facing a fairly high interest rate on your debt once it starts accruing.
6. Increase Income
While overspending can be a problem for people at any income level, if you’re not able to cover the cost of your credit card debt with your regular income, it’s time to think about earning more. Remember, we’re talking about taking serious steps here to pay off debt and leaving nothing off the table.
That said, look at taking on a another job and increasing your income while you’re working hard to pay off your debt. Don’t worry – it can just be temporary for as long as you’re still in debt.
7. Consider Additional Help
If your debt is a serious problem and you can’t shake it on your own, there is help available. However, these options have downsides, too, so don’t assume this is the easy way out.
You may want to consider trying to consolidate your debt. This could mean working with a credit counselor on a debt management plan that will spread out your payments to all your creditors.
If you aren’t eligible for such a plan, another option is settling your debts for less than the balances. This will ease the burden, but you will suffer damage to your credit. Black marks will stay with you for years and may cause you to be rejected for a loan in the future.
Bankruptcy is an option, too, but you’ll face the worst consequences on your credit history.
You’ll certainly want to talk to an expert when considering any of these options, and they, too, may encourage you to exhaust all other plans first.