Credit card debt can be one of the hardest forms of debt to overcome, requiring discipline and dedication in order to break free.
Assemble a budget and then focus on paying off debts by targeting those with the lowest balance first. Once that debt is eliminated, use any money left over from paying it off towards paying off other cards with similar or smaller balances.
1. Create a monthly spending plan
Paying off large credit card debt requires an investment of both cash and time each month, which requires creating a spending plan to keep expenses under control while your payments increase.
Start a spending plan by first listing your monthly income and expenses, with fixed and variable expenses separated out, before dividing fixed expenses by variable expenses to determine your spending each month.
Looking at non-essential line items can help reduce costs. Though it may be hard to cut back on some services, even small savings here and there can go toward paying down credit card balances faster. Furthermore, using cash whenever possible instead of credit cards makes overspending harder to achieve.
2. Cut up your credit cards
Credit cards can be an enormously convenient way of accessing funds, but their high interest rates and debt accumulation can quickly add up. By cutting spending, focusing on saving and employing proven repayment strategies, you can quickly become debt free with credit cards.
One approach is the snowball or avalanche method, in which as much of your budget as possible goes toward paying off the card with the lowest balance first. This strategy can be highly effective and is particularly suitable for people who thrive when seeing numbers and progress being made towards financial independence.
But if overspending becomes too easy for you, consider cutting up or freezing (literally) your credit cards – just make sure you have an emergency plan in place should an emergency arise.
3. Set aside a certain amount of cash for all your monthly purchases
Credit cards are rectangular pieces of plastic or metal that enable easy access to funds in your bank account. They can be swiped at gas stations, stolen, or compromised online; and credit card companies charge interest on purchases not paid off at the end of each month; which can lead to debt and financial strain.
Create a budget that details all your income sources and expenses. Compare these figures against each other to determine how much leftover money there may be to put towards paying down credit card balances.
Start paying down your credit card debt using the snowball method, to give yourself an early sense of success and remain motivated towards reaching your financial goals.
4. Freeze your credit cards
If you tend to overspend, freezing your credit cards could help curb unnecessary spending. Although this won’t stop you from charging things to them later on, it will prevent new purchases from taking place and won’t have any adverse impact on your score.
Cash-only shopping can help to minimize overspending by forcing you to stick to your budget and limit how much money is spent.
To successfully eliminate credit card debt, it’s crucial that you create and adhere to a plan. An effective strategy may be starting by allocating all extra income towards paying off one debt at a time until all are settled – creating a “snowball effect.” Once completed, then move onto another until all of your debt has been addressed.
5. Talk to your creditor
If you find yourself having difficulty meeting your credit card payments, don’t ignore them; rather contact your creditors and explain your circumstances; many are willing to work with consumers and negotiate modified payment plans.
They would much prefer receiving your monthly payments than having it go to collections agency. You can contact a certified credit counselor to discuss your situation with creditors; they may suggest a debt management plan which allows for single monthly payments made directly to each of them.
Personal loans may also help, although this could negatively impact your credit score and be taxed as forgiven debt is taxed as income. Be wary of debt consolidation loans with high-interest rates and fees as these may provide quick solutions but come at great expense to your finances in the form of high fees and interest charges.