Reducing Credit Card Debt

It seems that everywhere you turn today you see an advertisement from someone promising to help you eliminate your credit card debt or negotiate with your creditors on your behalf. Please know that these solutions usually only benefit the counselors offering the service and come at a tremendous price to your credit score. The only credit card debt solution that works is putting them down and paying them off.

Credit card debt is a sickness that has spread across our country like wildfire. It has infected almost everyone, from the very affluent to the impoverished, with its high interest rates and ridiculous fees. In order to be rid of this plague, you must first commit to living a life of frugality and necessity so you can start chipping away at its core, the principle.

The first part of the solution is to be committed to ceasing any and all use of credit cards. If you try to pay off the balances while you are still using them, it will literally be an exercise in futility. Get your finances arranged and make sacrifices in your lifestyle so that you only buy what you can afford to pay cash for. I realize it is difficult but it is the only way. Trust me, I’ve been there and done it.

Once you are living a totally credit card free lifestyle you need to list all of the balances of your cards from lowest to highest. Now start with the card that has the lowest balance and begin putting every cent you can find to pay it off. This will probably take a little while, depending on the size of the balance, because you are most likely already tight on your finances because you can’t use credit cards any longer. You need to be disciplined, focused, and full of resolve to never give up until it is paid off.

When the first card is paid off, take all of the money you were paying on the first card and apply it to the card with the next lowest balance. Continue paying as much as possible toward this credit card until its balance has gone to zero. Then, take the monies you used on the two previous cards and repeat on the card with the third lowest balance. Continue in this manner until all of your credit cards are paid off. This will happen much faster near the end because you have more money available after paying the previous cards off.

Quite often, people argue with me that they should start paying off the credit card with the higher interest rate first, instead of the cards with the smallest balances. While this will certainly save you a little bit of money mathematically, the confidence gained from paying off the first card and subsequent cards far outweighs the small savings. According to financial expert Dave Ramsey, success in personal finances is 80% behavior. When all of your cards are paid off, you can then use your new behavior and discipline to begin working on the rest of your debts and become totally debt free.

Most people already know what I am saying to be true. It’s actually kind of common sense, but human beings are masters at deceiving themselves when faced with a painful truth. But if you are willing to pay the piper and employ the steps above, you too can join the ranks of the truly debt free.