How to Get Rid of Credit Card Debt

According to the Federal Reserve Bank, the total consumer credit card debt in the U.S. now exceeds $880 billion. One in ten consumers hold more then 10 credit accounts, and the average consumer carries 4 credit cards (Experian's National Score Index). About half of all consumers make only the minimum monthly payment on their credit cards (Experian-Gallup Personal Credit Index Survey), and about 40% of American families spend more than they earn (Federal Reserve Bank
If these figures don't alarm you, they should at least make you feel better about your own credit card debt. Using credit cards for everyday expenses has become the norm for many American consumers, and as a result of overspending excessive credit card debt has also, unfortunately, become a norm. This doesn't mean, however, that you need to live with credit card debt and the resulting stress it brings to your daily life. Getting rid of your credit card debt can be one of the most freeing things you can do for yourself, and will not only help you financially, but mentally and emotionally as well.

Dealing with Credit Card Debt
Budget, budget, budget. And did I mention, budget? Budgeting is all about being aware and in control of your income and expenditures, and this is exactly what you need to start getting rid of your credit card debt. Creating a balanced, realistic budget for yourself (see the sidebar to the left) will help you to assess your credit card debt and create a another financial plan specifically for paying down your credit cards while taking into account your other everday, necessary expenses. Being realistic about the process and honest with yourself about your spending habits and capacity for self-discipline will give you a better chance of a) creating a payment plan that you can actually handle, and b) sticking to it: not feeling overwhelmed and not giving up is essential to successfully getting rid of credit card debt.

Stop using your credit cards as much as possible as soon as possible. It's hard to get rid of debt if you keep adding to it, so an important part of your debt-reducing budget should be limiting your spending to money you have now (not next week, or next month, or next year). Resist the temptation to use cash advances from credit cards, even to make payments on other cards, or to use credit cards for routine daily expenses. However convienent paying with a card may seem compared to carrying cash or keeping track of your checking account, and no matter how good your intentions are of immediately paying off small here-and-there charges, using your credit cards casually will only increase your debt problem and make it harder for you to control your finances.

Increase monthly payments towards your credit card balances, tackling cards with higher interest rates first. You'll definitely need to make more than the minimum monthly payments in order to eliminate your credit card debt, doubling (or more) your monthly payments on as many cards as possible. You may want to create a payment plan starting with the largest (or smallest) balances first and work your way down (or up) from there, but the smartest plan is one that addresses those cards with the higest interest rates first. Unpaid balances on higher-interest-rate cards will accrue more debt faster in the form of monthly interest charges, so by increasing your payments on these cards first you'll not only lower of your credit card debt faster, you'll save yourself a lot money in the long run. Of course, if any of your credit card balances are small enough (this is relative to each person's income and additional debts) that you can pay them off quickly and continue paying the high-interest cards, this may be a good way to hasten your progress and boost your sense of accomplishment as you face the daunting task of getting rid of credit card debt.

Consolidating your credit cards may help you get rid of credit card debt. Consolidating your credit card debt simply means turning multiple balances into one by transferring all your credit card debts onto one card. Besides giving you the convenience of only having to make one monthly payment instead of several, consolidating credit card debt is really about saving money by finding the best interest rate possible for the sum total of your debts. (Consolidation can also be a viable way of extending the length of your loan by lowering your total monthly payments, but if you're trying to get rid of credit card debt you should really be making more than the minimum payment anyway.) You can either try to transfer all of your balances onto an exisiting credit account with the lowest interest rate, or do some research and open a new account with a balance transfer option and an interest rate lower than your existing accounts. A good way to choose a new account is to compare the interest rate to the average rate of all your existing cards (or just those with the highest rates). If the rate is lower, go with it -- you'll save a lot of money on finance charges in the long run. Watch out for advertised low introductory rates, though; if the rate gets significantly higher after the introductory period it's not worth consolidating unless you can pay off the entire balance within that initial time period. Try to avoid using the cash advance option on one card to pay off another card, too. These transactions are often expensive because of added fees and can ultimately make it harder for your to get rid of your credit card debt.

Don't be afraid to cancel credit card accounts as you pay them off or consolidate. Once you've paid off or transferred the balance of a credit card account, cancel the account. Once you're out of credit card debt you'll probably want to keep one or two credit accounts open to improve your credit rating, so choose the account(s) with the best interest rates ahead of time and plan to pay off and cancel the rest of your credit accounts as you pay off your debt. Having too many credit accounts can ultimately harm your credit score, as well as increase the temptation to spend more money that you don't have, which will only lead you back into the credit card debt you're trying to get out of now. Credit card companies can be extremely aggressive and resistant to account cancellation requests, but be firm and don't settle for anything less than a complete cancellation of your account. I once had to spend half an hour on the phone with a department store credit account representative assuring him again and again that no, he didn't do anything wrong and yes, I really did want to cancel my card. It was worth it though, because now that's one thousand dollars of credit card debt I can't have and that is definitely a good thing.
Professional Debt Consolidation and Counseling
If you're trying to address your credit card debt and feel overwhelmed by out of control finances, you might want to consider consulting a professional financial advisor. Find someone -- an accountant, a debt consolidator, etc. -- who can help you evaluate your financial situation and develop a solid, long-term financial plan that takes into account your income, your lifestyle, and your outstanding debts. A reliable financial planner and a realistic debt management plan shouldn't offer quick and easy solutions; credit card debt is serious problem that requires hard work and long-term commitment to deal with sucessfully.