Do you know the total credit card debt of the United States population?
793.1 billion dollars.
Now you know. And now you have a sick feeling in your stomach. At least, I do.
Does that mean credit cards are evil? Nope.
It just means people are stupid uneducated.
That’s the problem. Here’s how to fix it…
Step 1: Access the Damage
Sometimes the first step is the hardest and that can definitely be true with credit card debt.
Face your debt.
Run the numbers and actually figure out how much credit card debt you have.
Go ahead and pull your free credit report at AnnualCreditReport.com, then head to Credit Sesame for your free score.
Once you know where you stand, it’s time to move on.
Step 2: Control Yourself
If you are in serious credit card debt, you have no self-control with them.
Easy fix. Stop using credit cards.
You don’t have to cut them up, and you don’t need to close all the accounts, but stop using them until you have paid them off and can pay them off, in full, every month.
You can always lock them in a safe or freeze them in a bowl of water. Or just stop using them and put them away like a normal person, whatever works for you. Just kidding! Freezing them is way more fun. Don’t be normal!
Step 3: Organize Yourself
Now that you know how bad it is, it’s time to do something about it.
Create a budget (learn how here), including all of your credit card payments.
Do you have enough income to cover all your expenses? You may not.
Step 4 can help with that…
Step 4: Cut Your Expenses
Cut. It. Out. (Full House reference, anyone? No?)
What do you need to cut out to eliminate your debt?
You can always cut something. Reevaluate your needs vs. your wants. Especially if one of your main wants is to be debt free.
Step 5: Make Your Choice
Now that you have faced your debt and cut your expenses, you should know whether or not you can fix this yourself or if you need professional help.
If you can do it yourself, do it yourself.
Only get professional help if you don’t see any possible way for you to do it on your own.
If you do need professional help, here is a good resource to find a good debt relief company.
Here is a list of approved non-profit credit counseling agencies.
I think you can do this though, if you think you can too, move on to step 6…
Step 6: Do It Yourself
I knew you could do it.
Paying off debt is easy in practice, but it can be difficult in discipline.
It’s all about discipline.
The most important thing is to not get into any new debt, once you begin paying it all off.
Once you have made that decision, you can call the companies and negotiate to bring the amount of debt down. This is as simple as calling the number on the back of the card, getting to customer service, and asking to speak to a supervisor. Supervisors are able to lower your interest rates more than the customer services reps. They may even be able to lower your balance.
When negotiating, it’s important to have some leverage. Just go find some cards that are offering a 0% balance transfer fee, with a 0% interest rate (usually for a certain length of time) and there’s your leverage. It’s easier to negotiate when you have the option of transferring your balance somewhere else.
The overall goal is to get a lower interest rate.
Should You Do a Balance Transfer?
If you can’t get a 0% interest rate, you may want to transfer your balance.
I see no reason not to transfer your balance, if it will save you money overall. The problem is when you are not able to pay off a balance transfer before the interest rate goes up. So, before you transfer a balance, do this:
- Figure out the total amount of debt your are transferring
- Divide your debt by the number of low/no interest months
- Decide if you will be able to pay that much each month
If you are, then it’s worth looking at. If you’re not, you need to figure out if the interest rate will be lower than you’re currently paying or higher. And remember to expect the unexpected. Just because you can make that payment now, doesn’t mean you will be able to make it for a year or longer.
As a sidenote, I would suggest that you NEVER use a home equity line of credit (HELOC) to pay your debt. That can be an incredibly dangerous plan.
As far as paying off your debt, I don’t want to sound redundant, so I will point you to these articles on the specifics of paying off debt:
Once your debt in under control, you may need to improve your credit score.
I hope you got something out of this. The important thing about debt is paying it off. It doesn’t really matter how you do it.