How to Develop a Plan to Pay off your Credit Cards

Like with many things in life, developing a plan is the first step towards becoming debt free. If you’ve accumulated credit card debt, you’re not alone and there is a light at the end of the tunnel. Starting today, develop a plan to pay off your credit cards and your debt will soon become manageable. It’s not going to happen overnight, but if you stick to your plan, financial freedom is in your future.

* Cut up your cards. Before you develop a plan to pay off your credit cards, you first need to make sure that your credit card debt isn’t getting any larger due to your spending habits. Although canceling your cards can have a negative effect on your credit score by affecting your credit-to-debit ratio, you shouldn’t keep your credit cards in your purse or wallet if you don’t have the self-control to use them responsibly. At the most, keep one emergency card with you, or put it at home in safe place if you don’t trust yourself not to use it on non-emergency purchases. Shred the rest so that you aren’t tempted to spend.

* Take an inventory. If you haven’t done so already, start by taking an inventory of all of your credit cards, including store credit cards. Write down the balance, APR, monthly minimum and annual fee for each card. Now you have all the information you need in one place to help you develop the best possible plan to pay off your debt.

* Establish a timeline. No plan is worthwhile without a timeline. Decide on a reasonable amount of time to pay off your credit card debt. Depending on your overall balance, this may be anywhere from several months to several years. If you’re eager to be free from the burden of debt, the deadline should be tight enough to make you feel a bit uncomfortable, without being so unreasonable that you want to give up.

* Consult a calculator. A credit card calculator, such as those on, can help you to determine how much you need to pay on each card every month in order to pay off your debt according to your new timeline. Simply enter the credit card balance and interest rate from your inventory, along with the number of months until you’d like to be debt free and the resulting table tells you how much you need to pay each month to make this dream a reality.

* Lower your interest payments. Even with a plan, you can end up paying a great deal of interest over the several years that it may take you to pay off your balances when you have a lot of credit card debt. First, trying negotiating with your credit card company for a lower interest rate. While not every company is willing to budge, some will lower an interest rate in order to keep a good customer. If they refuse, you also have the option of transferring your balances to lower interest rate card. Although this will save you money on interest payments, be sure to shop around for the best offer and watch out for high balance transfer fees, high regular interest rates and high annual fees.

* Develop a hierarchy. At this point, you’ve hopefully lowered your interest rates, established a timeline and figured out a general plan for paying off your debt. Now you need to decide which credit cards should be paid off first to save you the most money in accumulated interest. Online calculators can help you with this step as well, but generally you want to pay off the card with the highest interest rate first and then work backwards from there. Many people are tempted to pay off the cards with the smallest balances first, but this can result in the accumulation of hundreds or even thousands of dollars in interest charges.

* Stick to your plan. Now that you’ve cut up your cards and developed a plan of action, including a hierarchy of what should be paid off first, all you need to do is have the discipline to stick to your plan. Be sure to make your monthly payments designated by the credit card calculator and pay off the cards with the highest interest rates first to avoid unnecessary interest charges. Within a matter of a few years, or even months, you could be debt free, so keep at it and don’t let credit card debt ruin your financial future.