Eliminate credit card debt

Introduction

Eliminating credit card debt is the most dramatic change that you can make to improve your financial situation.  In America credit card debt is considered an epidemic.  On average a household carries more than $9,000 of credit card debt over from month to month.  Imagine how much better we all would be if we could even cut that number in half.  Fortunately there are many different strategies for eliminating credit card debt.  But keep in mind that there are no easy fixes.  It may have been simple to get the credit card in the first place, but when it comes to paying back the money, that is a different story entirely.  Some strategies will work for some and be impossible to follow for others.  In the paragraphs that follow you will read about various options for eliminating debt that will include methods for getting rid of your credit card debt quickly and some of the easiest methods for getting rid of credit card debt.  If one strategy does not yield the results that you are looking for, you may try another strategy.  But keep in mind that although the process will be challenging, it will be well worth the sacrifice in the end. 

Your options for eliminating credit card debt

Credit cards are not necessarily bad things to have.  Credit cards can be key in establishing a good credit history or being prepared in case of an emergency.  It is poor management of how we use credit cards that gets people into trouble.  There are several different ways that you can approach the re-payment of your credit card debt.  Keep in mind that not all of these ways yield favorable results.  Each repayment choice has its advantages and disadvantages that you must consider.

Paying the minimum payment

Paying the minimum payment on your credit card is a good way to postpone the inevitable that eventually you will have to re-pay what you have borrowed.  Making only minimum payments is also the best way to make credit card companies rich.  Credit card companies do not offer that you pay only the minimum payment out of the goodness of their hearts.  Every month that you carry a balance on your card you are adding to the total amount that you owe plus interest.  It is because of paying only the minimum payment that many people get themselves into debt trouble in the first place.

Accelerated repayment

When you have an accelerated repayment plan you decide that you will pay considerably more than the minimum required payment.  Ideally, your accelerated repayment plan should be such that you never carry a balance on your credit card but rather pay off the enter amount every billing period.  But people looking to eliminate their credit card debt have generally not observed this rule.  If you have multiple credit cards that you are trying to pay off, some experts suggest that you start by paying off the debt with the highest interest first, while other suggest that you pay off the debts with the lowest balance first and then work your way toward paying off the highest amounts.  Whatever method you choose, it is definitely to your advantage to commit as much money as possible each month to paying off your debts (without, of course, putting yourself in a situation where you will have to borrow more money to cover your essential expenses). 

Debt consolidation

Another option to eliminate credit card debt is to take out or refinance a mortgage or take out a line of credit and use those funds to pay down your credit card debt.  Debt consolidation can be a quick way to eliminate credit card debt and save you from having to pay more interest costs.  A big disadvantage to debt consolidation loans is that the negative repercussions of failing to re-pay third type of unsecured debt can be severe.  You must be serious about changing your payment habits and sticking to those changes or you could loose your home and other precious assets (far worse than missing or even making a minimum credit card payment).

Consumer credit counseling

A credible consumer credit counseling service can help you in creating a debt management plan.  In this plan, you need only make one monthly payment to the counseling service and they will take care of dispersing that money to your creditors in the way that they feel is most prudent.  They can also work with your creditors to try to lower your interest rates or even eliminate the total amount that you owe (although this is not always a good idea as it can have negative effects on your credit report).  Unfortunately there is a huge danger of becoming a victim of an un-ethical credit counseling service and the possibility exists to end up in a much worse credit situation that you started in.  Careful research into only not-for-profit credit counseling services is needed before considering this option.  It is also wise to consider the fact that there is nothing that a consumer credit counseling service can do for you that you cannot do for yourself.  It is simply a matter of whether or not you are willing to put in the work that will be required.

Bankruptcy

The last option to eliminate credit card debt is to declare personal bankruptcy.  In a traditional Chapter 7 bankruptcy filing you may be able to eliminate credit card debt completely, depending on your situation and whether or not you qualify.  This option should only be considered as a last resort as there are severe negative consequences to claiming personal bankruptcy, such the severe, public, and long term negative impact on your credit report that could prove detrimental to any loan request that you have for as long as the next 10 years. 

Eliminating your credit card debt quickly and easily

There are many techniques out there for eliminating your credit card debt, but not all of them allow you to do so as quickly as possible.  Below you will find a sample method that you can use to get yourself out of credit card debt as quickly as possible. 

1. List all of the credit card debts that you have.  Make sure to include the balance of the debt, the interest rate and the minimum payment amount.
2. Organize this list that you have made in step one so that the balances with the highest interest rates are at the top and that the lowest interest rate debt is at the bottom.
3. Add up the required minimum payment amounts for all of your credit card debts (you will still need to pay at least this much every month to avoid any trouble with collection calls).
4.  Create a budget or refer to your existing budget to determine how much more you can contribute to paying off your credit card debt every month without going into a negative number or having to take out a loan or add to your debt to cover basic expenses.
5. Each month pay all of the minimum balances plus apply all of the additional income possible to paying off the highest interest debt first.  Do this each month until the highest debt is repaid and then start on the next highest interest rate debt.

Follow this method each month for as long as it takes until all debts are re-paid.  Apply as much additional income as possible to paying off these debts as opposed to over inflating your savings account.  This is because the percentage that you earn from savings is likely going to be much less than what you will have to pay the longer it takes you to pay off your higher interest debts.  Instead of organizing your debts based on interest rate, you can also try paying off your debts starting with the debt that has the lowest balance first.

Stopping the habit of using credit cards
 
All of the progress that you make in eliminating your credit card debt will be wasted if you are not able to stop the habit of using your credit cards irresponsibly.  Even before starting a credit card debt elimination program consider and decide to do at least one (if not all) of the following suggestions for stopping the accumulation of debt on your credit cards:

• Cut them up - the best way to make sure that you do not use your credit cards irresponsibly again is to eliminate the temptation.  Simply do not carry credit cards.  If you still feel that it is necessary, you may want to keep the one or two credit cards that you have that have the most favorable terms somewhere safe in case of an emergency.
• Write checks or use debit cards - when you write a check or use a debit card, you are forced to keep track of where your money has gone and how much of it you have left.  By doing this you can help to eliminate frivolous spending. 
• Use cash - even better than writing checks or using a debit card, using cash is really a visual reminder that you are paying with real money.  You should not be spending money that you do not have.  This spending of money that isn't yours is impossible to do if you only pay with cash.