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Clark Howard: How to Get Out of Credit Card Debt in Three Years (Or Less)!

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There is no question times are tough and that Americans are trying to do more with less. (See: As America's Middle Class Shrinks, P&G Adopts "Hourglass" Strategy)

In a startling, but perhaps not unexpected, turn of events, many consumers have reverted to using plastic to cover costs.

A new report released by CardHub.com Monday revealed that consumers racked up $18.4 billion in new credit card debt in the second quarter of this year. That's 66% more than the same period in 2010 and 368% more compared to 2009! And by year-end, CardHub.com projects consumers will have accumulated $54 billion more in credit card debt.

The good news: Consumers are spending. The bad news: The financial crisis of 2008 was spurred by overleveraged consumers.

What is somewhat reassuring is that consumers are not oblivious to the perils of too much debt.

"The psychology has completely changed among the American people," says Clark Howard, consumer advocate and host of the nationally syndicated The Clark Howard Show, while comparing today's consumer with yesterday's. Before the recession, Americans were consumed with how to compare and take advantage of the endless number of debt offers, but today "all I hear about now when it comes to borrowing and debt is how to get out of it."

If you're one of those consumers who are trying to deleverage, fear not. Howard joined The Daily Ticker's Aaron Task and brought with him advice on how to get out of credit card debt in three years or less! He calls it the best "truth serum" you can get on the matter.

When your credit card statement is delivered to your mailbox each month there is now a federally mandated box on it that tells you how long it will take you to get out of debt. This very important box has two sections:

Section #1: This section shows you how long it will take you to get out of debt if you pay only the minimum amount due on your statement. In most cases, it is 30 to 40 years time, Howard explains.

Section #2: This is the more important of the two. It shows what you'd have to pay per month to wipe out that credit card debt in just three years. Obviously, if you pay more than this amount, you'll be out of debt in less than three years.

"The amazing thing is the difference you have to pay per month to go from paying it off in three years versus forever is not that much," says Howard who is also the author of Living Large in Lean Times: 250 + Ways to Buy Smarter, Spent Smarter and Save Money. "I want people eyes automatically to go to that box on a credit card statement. Rethink your how you handle your money [and] do whatever you need to do to get out of debt in three years or less."

Rethink How You Handle Your Money

In his book, Howard recommends thinking of your finances like a "triage room at a hospital," which basically means to prioritize your spending and monthly bills. Make sure you can pay for your necessities like groceries, mortgage and rent and transportation costs first.

"After you take care of those basics each month, I want you to drop your credit card debt a few notches down the totem pole and ignore the lenders if you don't have money to go around," he writes.

Don't worry about your credit rating, he suggests, because chances are your credit is already messed up.

If after you "triage" your finances and you still are not able to make ends meet, you may need to see a credit counselor. Or, you can also try using a free online budgeting tool. Howard's favorite is Mint.com.

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