One of the biggest challenges in personal finance is managing credit card debt. Credit card debt levels in the United States are staggering and with high interest rates and multiple cards, the prospect of getting out of debt can seem overwhelming and even insurmountable. If you can afford little more than the minimum payments, the debt will continue to grow, and it likely feels like there is no end in sight. When you are at the base of that mountain of debt, it can feel pretty hopeless. The truth of the matter though is that no one conquers a mountain in one day. It takes careful strategizing, focus and discipline.
Let’s consider some steps you can take to finally made a dent in your debt. Our debt dissolver is a program designed to let you chip away at your debt in a very methodical way, helping you to conquer that mountain before long.
Tips for Paying off Credit Card Debt
1. Create a List of Your Debts
Make a list of all of your credit card debts, including balance, minimum payment and interest rates. You can include student loans and auto loans, but do not include mortgages.
2. Reorder the List from Smallest Outstanding Balance to Largest
Even if a debt is extremely low and seems inconsequential, be certain to include it. Ignore minimum payments and interest rate. It is important to order the list from smallest outstanding balance to the largest.
3. Continue to Pay the Minimum Payment on All of the Debts Listed
Focusing on paying off one debt exclusively will not help the overall situation if you are no longer current on the other credit cards. Not only do you need to be a responsible borrower, but this is not the time to increase the debt due to the late fees and higher interest rates that are sure to come.
4. Focus Intently on the First Debt Listed
Circle the first debt. If there is any wiggle room in your budget or if you were perhaps paying a little more than the minimum on some of your debt, all of the excess should go toward aggressively paying off the first debt. Then, any additional money that may come in should be allocated towards that debt as well.
Note: Get creative! Are there things lying around the home that you no longer use and can sell? Is there anything in your budget that you can cut to free up cash? Are there opportunities available to easily earn a little extra money? Can you be more resourceful with shopping?
No, I’m not suggesting you rack up more debt, but take a moment to pat yourself on the back. Strike a big “X” through the debt and acknowledge that your hard work and focus paid off. This will set the tone for continuing through the process. We must celebrate our small successes.
6. Repeat the Process with the Second Debt
It’s time to refocus intently on the second debt. You have now freed up the amount of the payment that you were making to the first. Apply that extra money to the minimum payment on the second smallest debt as well as any additional monies that may come in.
7. Continue to Repeat for Each Subsequent Debt
Each time you pay off the previous debt, you have freed up that payment amount to apply to the next. Continue to move through the process until you are debt free. Stay focused and aggressive, and you will be amazed at the results.
It may seem counter-intuitive to focus on the smallest balance when large balances or high interest rates loom. And we would certainly encourage you to consider transferring a large balance to a lower interest rate card if the opportunity is there and the transfer fee makes sense. It also cannot hurt to call your credit card companies and inquire as to lowering the rate; the worst they can say is no. Despite the interest rate disparities, we have countless stories of debt dissolver success. It works.
We have worked with people with over $100,000 in consumer debt who have paid it off in two years. Just last year we met with two young members who were saddled with student loan and credit card debt. Within one year, by following this plan with singular focus, both are debt free.
Stay intently focused and you too will soon be debt free.