Although I'm not a financial expert, when it comes to being in credit card debt, I can claim some expertise. As I have tried to get out of debt myself, with some success and the occasional setbacks, I have gleaned some tips for paying it off from the real experts out there. Here are some "get out of credit card debt" suggestions that have on occasion worked for me and may work for you, too.
- Figure out what you owe. If someone were to ask you how much you owe, would you be able to give her a real number or would you just say "a lot?" To start getting out of debt, know how much you owe. From there, you can begin to formulate a real plan for getting to that beautiful zero balance point. Also, make a note of things like the minimum due payment of each card and the interest rates and finances charges you're being subjected to each month. This will help you evaluate later which card to pay off first.
- Figure out where you spend so you know where to cut. Of course, the reality is many people are in debt because they don't have the cash for essential and often unexpected car breakdowns, medical emergencies, and that kind of thing. If you're in that category, you know where your money went and you're in a place of your own. However, if you're in big credit card debt and can't figure out why, start tracking your spending. Where are you laying down that plastic? Where are you spending cash that you could be putting toward paying down your debt? As you list everything you spend--everything--you will see where you may be throwing away good money after bad, wasting, or not being as frugal as you may need to be. Knowing what you're doing is the first step toward figuring out what you should stop doing in pursuit of those zero balances.
In my case, I realized I spent a lot of little sums here and there, usually in cash, on things I didn't need. Sure, it was fun to spend, but when the monthly bill came around and I didn't have cash to pay even the minimum, it wasn't ultimately worth it. When I stop spending, I can start paying off those debts and relieve some stress. Definitely better than those nickel and dime items.
- Make a budget that doesn't have you spending more than you earn. It's amazing what living in your actual means can do for your finances. Once you know what you spend, figure out what you can actually afford. Making $600 a week? Carrying $5,000 in credit debt? Buying those $300 shoes is probably not an option. Think of what you really, really need--food, shelter, clothing, transport--and then see what you can cut. You may find you have tons of cash left over for paying those debts off once you stop making big purchases (or in my case, a lot of little ones) when you can't really afford them. Or, another thing you may realize is you don't have that extra money even when you pare things down (you may already be pared down!) and then what you really need is more income. Then it's time to figure out how much you need to earn to make some headway without relying on credit cards. And then you need to figure out where you can make it. This could mean finding another job or selling some of your stuff on eBay. Only you know what you need. But another source of income may be necessary for you to get out of debt.
- Pick a card and focus on paying it off. If you're like me, you probably have credit card debt coming at you from several different directions. And they all have different "balance due dates," don't they? While it may be a struggle just to get the minimums paid on all your cards, it's a good idea to give one card a little extra attention. Paying off the card with the highest interest rates will save you money in the long run. It will free up cash each month. And paying off any card will give you a psychological boost! So, come up with a priority list--which card do you want to pay off first, second, third? Then figure out how you can stretch your monthly income to make that possible.
- Sign up to pay bills online to avoid fees. Of course, the reason many of us pay our bills late is because we don't have the cash on hand when the due date comes around. But, admit it, plenty of times you've racked up late fees on your credit cards because you put the check in the mail so close to the due date there's no chance of it getting to the creditor on time. One way to save some money and progress to your debt-free Nirvana is to sign up to pay bills online. That way, provided you have the cash, you can sit down, click a few keys and pay bills just a few days before the due date without worrying about the transfer happening in time. Though--do watch out--because some online payments don't register the same day the transfer is made. Paying bills online still doesn't let you pay at the very last minute, but it does let you take care of business quicker than "snail mail."
Don't forget the convenience factor. Paying bills online is also good for those of us who always misplace the pre-addressed envelopes, or who never have stamps, or who don't feel like writing out a bunch of checks every month. Look into it if you're not doing it already. I've managed to all but eliminate late fees from my life by paying bills online.
- Transfer balances to low interest cards. This is a great way to make some debt headway. A personal experience: I had a card that was maxed out and then some. I was on a special program with the card company that let me pay a fixed fee each month, lower than I probably should have been paying. Interesting fact: That "minimum due" was about one dollar more than the fees I was also being charged every month. So, in other words, even with their "helpful" program, I was making absolutely no headway with the card as I could not afford more than the minimum. I'd put in $60, they'd charge me $59. Nice. If I followed their plan and paid only the minimum, I estimated it would take me about 30 years to pay the card, and the money I'd be spending was a huge sum. All for a credit debt of less than $4,000. It was a monthly frustration and I couldn't figure a way out.
Then along came a new credit card. No annual fee. Low fixed APR for a year. No charge on balance transfers made right away over the phone. I took that deal and ran. Now, not only am I paying on the principal each month, I have no monthly over limit fees or finance charges. I have never loved a credit card so much! Be careful, of course, because many new cards do charge fees on transfers and, as always, read the fine print on any credit card application before signing on.
- Ask credit card companies for some help. People are always suggesting debtors call up their credit card companies and ask for some help--be it a lower interest rate, a moratorium on finance charges, or some extra time to pay a bill. Personally, I have tried this only once (with the above nightmare card) and it got me nowhere. To be fair, they had already arranged for me to pay a lower monthly fee. But, again, they were charging me roughly the same amount every month, so it was basically a moneymaking deal for them. Anyhow, there's nothing to be lost by calling your credit card customer service line and asking for some help so you can get out of debt. They make money when you're in debt, true, but they don't make any money if you get so annoyed that you eventually pay off the card and take your business elsewhere or if you're so broke you can't pay them anything at all.
- Pay a little more than the minimum on all cards. It may seem impossible some months to pay even the minimum due. Or, it's tempting if you have extra cash to spend it, not put it toward your debt. However, one way to get out of debt quicker is of course to pay more than just that minimum. This lowers the amount on which you're being charged interest, possibly lowers your next minimum payment and gets you closer to paying off the card for good. So, consider paying $40 instead of $30, for example. It's $10 well spent.
- Save some cash. Imagine this: You clear up some credit card debt and feel pretty good about yourself. One less minimum payment to make. But then, something happens--your check's a little short, your kid needs something for school, or, God forbid, there's a real emergency that requires you to spend some money. You've been spending all your cash on paying off your credit cards, so you have no savings. So, you have to go back to that card you just paid off and start all over again. It's sort of like a yo-yo diet, isn't it? How do you avoid that? Put a little cash aside--tough as it may be--to keep yourself from having to delve back into the pile of cards. While experts I've heard and read in various sources say "save enough money to take care of your expenses for three months," personal experience tells me many of us can't afford to save enough to cover even one month! We just don't have the income. But putting aside a little, even if it means sacrificing some things you enjoy--like don't eat out or don't rent movies for a week--can keep you off the credit card merry-go-round.
- Don't go back! With some hard work (maybe at more than one job...), you can get out of debt. After you do so, vow never to go back. You don't need to close all your accounts--especially if they don't charge an annual fee--because your credit report will look better if you have a lot of credit and not much debt. But cut up the cards to avoid the temptation. Just say no when your favorite department store extends you some credit. Plan, budget and be smart with your money. If you do use a credit card, make it a small sum and pay it off right away--not "later on." You don't have to live life on the cheap, but you can endeavor to live without spending beyond your means.
Now you know how to get out of credit card debt. Don't stress if it doesn't happen overnight; eliminating debt takes time.