How to Get Out of Credit Card Debt — Your Guide
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Total credit card debt in the United States reached $807 billion in the first quarter of 2019, according to Experian. That’s a lot of debt — and 60.5% of Americans have a credit card. With so many Americans relying on credit cards, it’s clear to see that if you feel overwhelmed by credit card debt, you’re probably not alone.
If you’re struggling, you might be wondering how to get out of credit card debt. The good news is that it’s possible to tackle your debt and improve your finances. Here’s your guide to the easiest ways to get out of credit card debt.
1. Evaluate your current credit card debt situation
The first step is understanding where you’re at. By laying out the situation and seeing everything, you’ll be able to determine your starting point and make a more effective plan.
List out all your credit cards. This list can be written out, or you can make it in a spreadsheet. Whichever way you choose, though, it makes sense to use the following columns to display the information:
- Name of your card
- Card balance
- Interest rate
- Current minimum monthly payment
Now you have a clear view of exactly where you stand and a solid starting point for moving forward with getting out of credit card debt.
2. Look for unnecessary automatic charges to your cards
Now it’s time to look through your recent credit card charges. Find charges that are unnecessary, especially recurring charges for subscriptions you don’t use. Cancel these recurring charges. This should help prevent you from adding to your credit card balance.
It’s also a good idea to look for other credit card spending that might be unnecessary. Figure out if you can stop using your credit cards for a while and make other payment arrangements for your bills and expenses. The less you can use your cards as you tackle your debt, the better off you’ll be.
3. Call your credit card companies
Next, call each of your credit card companies. See if you can get a lower interest rate on your card. A lower interest rate makes it easier to pay off credit card debt, since more of your payment goes to reducing your principal.
Another strategy is to see if you can get a lower minimum payment on each card, which makes it easier to focus on one card at a time when you create your plan. With lower minimum payments, you can put more money toward one card at a time to pay it off quicker before moving on to the next card on your list.
4. Consolidate and transfer debt to a 0% APR balance transfer credit card if possible
One of the easiest ways to get out of credit card debt is to take advantage of a 0% APR balance transfer. All of your payment goes toward reducing your balance when you aren’t paying interest.
In many cases, you might need to have good credit to get the best balance transfer deal. Additionally, you might not have a high enough limit to move all of your debt to the 0% APR balance transfer card. If this is the case, consider moving the balance with the highest interest rate so you can at least stop accruing that interest.
If you can’t get a credit card balance transfer, consider looking into other types of credit card refinancing, such as getting a personal loan with a lower interest rate. If you qualify for an interest rate lower than what you’re paying on your credit cards, that can make a big difference in how quickly you pay off your debt.
In addition, there are companies like Tally that specialize in helping people manage their credit card debt. Tally not only offers a low-interest line of credit where you can consolidate your debt, but they also help simplify and prioritize your monthly payments.
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5. Create a plan for paying off your credit cards
Once you’ve done what you can to make it easier to pay off your credit cards, it’s time to put together a plan for systematically demolishing your debt. It’s easier to get out of debt when you have a plan to follow.
First, sit down and evaluate your overall monthly costs. Consider your needed expenses, like housing, utilities, food, insurance, your current minimum payments, a modest emergency fund, and other bills. You can also set aside a reasonable amount for fun. The reality is that if you restrict yourself too much, it’s harder to stick with your debt payoff plan. After you’ve accounted for these items, see what you have left over. This “extra” money” will go toward paying down your credit card balances.
Now decide on your actual plan of attack. There are different approaches that work for different people. Here are three different strategies and how they work:
- Divide money evenly across cards: Divide your extra money evenly and use it to increase your payment to each card each month. So, if you have six cards, you pay the minimum on each, plus one-sixth of your extra money toward every card. This works best if you want to “set it and forget it.” Use automatic payments to make the same payments on all your cards every month until the debt is gone.
- Debt snowball: Order your debts from the smallest to the largest balance. Pay the minimums on all cards and put your extra money toward the smallest balance. Once that balance is paid off, focus all your extra money on the next card on the list. This method works well for those needing a quick win. Psychologically, you get a motivating jolt as you pay off each debt — and that jolt comes easier if you can retire a smaller balance early on.
- Debt avalanche: Rather than ordering your debts from smallest to largest, you instead start by tackling the debt with the highest interest rate. This method will result in the smallest amount of interest paid and will likely get you out of debt fastest. However, it can be psychologically difficult, since your first “win” in retiring a debt takes longer. If you can stick through that, though, the debt payoff accelerates toward the end.
The best plan is the one you’re most likely to stick with until all your debt is paid off. Carefully consider your situation and what’s best for you.
6. Start a side hustle
If you want to boost your speed of getting out of debt, consider finding additional ways to make money. Choose something you enjoy doing or that doesn’t stress you out too much. It should pay somewhat decently. Take all the money you earn from your side hustle and put it toward your credit card debt, according to your chosen plan. This will really supercharge your efforts.
7. Create a visual reminder/tracker
One of the easiest ways to stay motivated as you get out of credit card debt is to create a visual reminder of the progress you’re making. There are several ways you can do this, including:
- Marking off debt milestones on a calendar
- Creating a chart and sticking it to your fridge
- Using a white board to document your progress
- Buying or creating a thermometer and filling it in as you pay off debt
No matter how you do it, a reminder can help you see your progress and keep you motivated to stick with your plan.
8. Check your cards regularly
Choose a time of the month to review your credit card balances. You can use this information to update your spreadsheet of balances and minimum payments, as well as to update your visual reminder. You don’t want to check too often, since it might be harder to see the differences. But if you check monthly, you’ll start to see solid progress that you can feel good about.
If you don’t feel like you’re making progress
Sometimes, even with a plan on how to pay off debt, it still feels like you’re not making any headway. In these cases, you might need to take additional steps to move forward:
- Speak with a nonprofit credit counselor: You can go to the National Foundation for Credit Counseling website to find resources and credit counselors near you. If you’re struggling, a good counselor can help you put together a debt management plan that works with your budget.
- Take out a personal loan with a better interest rate: Even if you weren’t able to get a personal loan earlier, after a few months of paying down your credit card debt, you might be able to qualify for one. See if this will work for you now.
Tips for staying on track as you get out of credit card debt
To make the most of your efforts, here are some tips for staying on track with the easiest ways to get out of credit card debt:
- Stop using your credit cards: Stick to a budget and avoid using your credit cards. Use cash as much as possible so you avoid adding to your balances. A good budgeting or money app can help you set goals and stay the course.
- Set automatic payments: When you make automatic payments, it’s much easier to stick with your debt payoff plan. You won’t forget or put off your payments.
- Incentivize yourself: Create a reward for paying off a card, preferably an experiential reward — not one that will cost a bunch of money. This will give you something to look forward to as you move through your plan.
If you approach your credit card debt in a systematic manner, you’ll be more likely to succeed. Create a plan and stick with it, and you’ll be on firmer financial footing sooner than you might think.
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