10 Steps to Eliminate Credit Card Debt
People always ask me this same question: “How can I get rid of my credit card debt as quickly as possible”. And the answer is always: “You didn’t get into debt overnight, and you most certainly won’t get out of debt overnight either. Work hard on it, be patient, and start now!”
I’m going to give you a guide or a step-by-step plan to help you eradicate your unsecured debt as quickly as possible and also save some money while doing so. It’s not going to be easy, and it’s going to take some major behavioral changes and possible life changes to stop the vicious cycle of debt, but you can do it!
Step 1 – Bury Your Credit Cards
Okay, well maybe don’t actually bury them, but you know what I mean. Get them out of your wallet and out of sight, now! Place them in a safe or somewhere that you could have access to them in an absolute emergency situation, but make sure they are still tricky to get to and not readily available.
After that, go online to every retailer that you’ve ever purchased things from online and delete that stored credit card information. Places like Amazon.com, Walmart.com, PayPal.com, Groupon.com, etc. Make sure that you don’t forget any! It’s way too easy to do that “one-click” shopping when your credit card info is already stored and so easy to use. You need to get rid of that option as soon as possible.
The reason you must do this step first right away is because you need those balances to go down, and they only way that’s going to happen is if you completely STOP using them. The most important habit that you need to break is reaching for that plastic all of the time. You need that tangible connection to real money (cash) to let you know just how much money you are really spending.
Step 2 – Create a Realistic Budget
The next thing you are going to want to do is set up a realistic budget based on your current spending habits. You need to know exactly where your money is going every month. What’s coming in and what’s going out will give you a great idea on what changes need to be made. You can use free online budgeting tools such as Online Budget Advisor to help you set up a budget. It only takes a few minutes, but the amount of knowledge that you will gain is so important!
Step 3 – Understand Your Credit Card Terms & Rates
Next, find the most recent statements for all of your credit cards, and establish exactly how much you owe and what the interest rate is on each one. This information should be easily found on your statements, but if you’re having trouble finding it, call the credit card provider and ask them. Understanding key credit card terms will help you manage your accounts and will be very important when trying to pay off the debt.
Then, you’ll want to create a list of pertinent information about each card, such as the card name/type (Discover, Visa, MasterCard, etc.), the current balance, the interest rate, and any other fees (annual fee, transfer fee, payoff fee, etc.). Later on when you develop a payoff plan, you can use this handy list to figure out which card to pay off first and vise versa.
Step 4 – Look For 0% Balance Transfer Offers (Be Cautious)
Once you have strong knowledge of what’s going on, and how much you owe, and to whom, you can start to look into balance transfer offers. Check out your current credit cards first, but if they don’t offer transfers or they have very high rates or fees, you may need to open a new one. Look closely at the balance transfer fees because that could be where they get you!
Discover potential balance transfer offers available (read the terms carefully) and note the interest rates and associated fees. Try to find one that has zero transfer fees and zero interest if possible, or zero transfer fees and an interest rate that is lower than any of your current cards.
Next, transfer your highest balance and keep moving down the list. As long as it makes sense; that’s the most important part! You don’t want to transfer if you end up spending more money or transfer to a higher interest rate or get hit with a ton of transfer fees. It all has to make sense to lower your debt and to save you money by paying less interest.
Step 5 – Get Free Consumer Credit Counseling
Now that you have all of your information at hand, and you have a pretty good idea of your current financial situation, give a Non-Profit consumer credit counseling agency a call. The call is completely free and 100% confidential. A certified credit counselor will review everything with you, answer any questions that you may have, give you different repayment options, and could possibly help you even more by suggesting and discussing if a Debt Management Program is right for you.
A Debt Management Program could help you pay off your debt in the fastest and safest way possible, plus it could help you save hundreds or even thousands of dollars. Click Here to find out more about a Debt Management Plan and how it could help you.
Step 6 – Avoid Cash Advances or Payday Loans
It may be very tempting to get some “fast cash” from cash advances or Payday Loans, but I don’t advise going that route. Many people who come to us for debt help are in trouble because of Payday Loans. People don’t realize the super high interest rates, the associated fees, or the amount of time to pay it back can make it almost impossible to ever pay it off. It’s like the Payday loan system was created to make sure that you fail and that you get stuck in that horrible payday loan cycle. Here’s a great article about Payday Loans and why you should avoid them at all costs: http://www.bankrate.com/finance/debt/6-alternatives-to-payday-loans.aspx
Step 7 – Sell, Sell, Sell
If you have the opportunity to get a second income via another job or side work, then please do so. It will be tough on your social life and maybe your sleep cycle, but being able to bring in a second income or extra cash is the best way to get out of debt quickly.
The next step is to get rid of any used or unwanted items and sell them for cash. We all have items that are just lying around the house and collecting dust. Try to sell some of this stuff: clothes, shoes, purses, DVDs, knickknacks, video games, CDs, baseball cards, vinyl records, books, DIY crafts, sports equipment or workout equipment like that treadmill that you never use.
If you really need money and you aren’t using those items, or you can part with them, then by all means jump on websites like eBay or Craigslist and sell them. Have a garage sale or yard sale if you aren’t comfortable with selling things online. We all accumulate unnecessary items, but most people don’t think about selling those unnecessary items when they need money.
Step 8 – Be Frugal and Save Money
If you want to continue on the fast track to becoming debt-free then it’s imperative that you keep up with your frugal habits, money management, monthly budgeting, and on-time monthly debt repayment obligations. Always look for ways to save money, make money, and not spend money when it’s not a necessity. Before you purchase anything ask yourself one simple question: “Is this a WANT or a NEED?” If you are truly honest with yourself, more often than not, you’ll realize that it’s just a want.
Step 9 – Stick To Your Debt Reduction Plan
If you’ve signed up for a Debt Management Program (DMP) through a reputable Non-Profit consumer credit counseling agency, they will help you stick to the plan. They will hold you accountable for making that one monthly payment to them, so they can distribute that money to your creditors who agreed to the DMP terms. One way to ensure that you keep to your end of the bargain is to set up an automatic monthly payment that gets taken out of your checking account on the same day every month.
With everything being automatic, you don’t have to worry about forgetting to send the money that month because you were busy at work. This will also help keep your creditors happy, and your credit score will begin to get better. As you pay back your creditors (on time) and your debt begins to decrease, you’ll see the added benefit of your credit score going up. This is because you’re meeting your debt obligations and improving your debt-to-income ratio, which both have a positive effect on your credit score.
If you haven’t signed up for a DMP and you are tackling your debt all on your own, decide which debt repayment method works best for you. The two major debt repayment methods are the Debt Avalanche Method or the Debt Snowball Method. Here are two blog posts that talk about each technique in-depth to help you decide: https://www.advantageccs.org/how-to-use-the-debt-avalanche-method and https://www.advantageccs.org/how-to-use-the-debt-snowball-method
Step 10 – Find Motivation and Support
It might be tempting to stop and revert back to your old money management skills when the debt is under control, and you’ve paid off some cards, but don’t STOP! It’s important that you don’t go back to your old habits that clearly weren’t working.
I’m not saying you need to keep pinching pennies or you can’t use plastic ever again (pay off the entire balance EVERY month), but you don’t want to get stuck in the same situation that you just got out of. Trust me, it’s pretty easy to fall back into that debt trap and we don’t want that to happen.
Reach out for help and support. Talk to your friends and family, or join an online debt reduction community forum. Sign up for monthly newsletters or blog posts from Advantage CCS. “Like” our Facebook page for daily money saving tips, motivational messages, and much more! Follow us on Twitter or just give us a call (866-699-2227) whenever you feel yourself sliding back into your old money habits. We’ll always be here for you, no matter what!
Debt happens! It can honestly happen to anyone. We’ve worked with millions of people from ALL walks of life with very similar and also unique situations. For whatever the reason may be, they ended up in debt, and they needed our services. We’ve been helping consumers get out of debt since 1968. Advantage Credit Counseling Service is a 501(c)3 National Non-Profit agency that can help you get out of debt and get your life back on track! Visit us at www.advantageccs.org or call us today!