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Get Rid of Credit Card Debt Once and For All


Today, Americans have $798 billion in revolving debt, most of which is on credit cards. Due to the ease and convenience of paying with plastic, credit card debt has become ubiquitous. It's no surprise then that financial experts zero in on this debt as the first step on the path to financial freedom. Getting out of debt, however, is easier said than done.

Take Stock of Your Finances. The days of balancing your checkbook by hand are over. There are numerous online tools available to help manage your finances, and many, such as Mint.com, are free. The first step to getting your personal finances under control is to clearly understand where you stand. Online tools make the process simple and easy.

Understand Why You Are in Debt. A key component in the "getting out of debt" game is to first understand why you are in debt. Is it the result of unforeseen big purchases, like medical bills or emergency car repairs? Or is it because of impulse purchases that now have you facing a mountain of debt? Identifying the cause will help you change your spending habits--a critical step to climbing out of debt.

Stop Going Into More Debt. The hardest part of getting out of credit card debt is avoiding new debt. This is especially true when you've become accustom to using your credit cards on a regular basis. Once you are in debt, avoiding more debt is critical. The way you choose to handle this is closely related to what got you into debt in the first place. For example, if emergency situations have forced you to reach for you credit card then you can avoid this in the future by having an emergency fund in place. Using an online savings account to stash away your emergency fund is a way to save for those unexpected situations. It also keeps your savings out of hands reach, which allows it to still be there when you need it the most.

If impulse buys have gotten you in trouble, taking more extreme measures, like cutting up your cards or even canceling your credit cards might be the best solution. However, canceling a credit card will drop your credit score by a few points, so this might not be the best option for everyone. Another measure you can take to control your spending is to have your credit limits lowered.

Create a Plan. Developing a plan doesn't have to be difficult. It can be a list of a few simple steps that give you some direction and help keep you motivated. Your list could be as simple as this:

-- List credit card debits

-- Pay off high rate balances first

-- When one card is paid off, apply payment to next lowest balance

-- If at all possible, pay more than the minimum balance so you can avoid paying interest

Black Belt Tactics. If you really want to take things to the next level, you can maximize your efforts by applying some of these tactics that will get you out of debt faster and help you save money along the way:

-- Credit card debt is expensive. Even "low-interest" cards typically carry rates above 10 percent with high rates up to 20 percent or more. These interest charges add up fast. By improving your credit score you might qualify for a lower rate. Calling your card company and asking them to lower your rate is an option, but this will often require your credit score to be up to par.

-- A smart step to take is to use a zero percent balance transfer offer and transfer any high rate balances. This will help you avoid paying potentially thousands in interest and get you out of debt faster.

-- The absolute fastest way to eliminate your debt is to pay more than the minimum payment. The best way to do this is to free up extra cash. You can do this by cutting back on some of your expenses or you can try to get a side job to earn more money.

Michal Cheney is a frequent contributor to Go Banking Rates, Dough Roller, and Credit Card Offers IQ, where you can find the best balance transfers card offers.

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