Getting Out of Credit Card Debt

Reduce, Eliminate and Pay Off Debts for Stress-Free Living

Aug 13, 2009

Hundreds of people are drowning in credit card debt. This causes them to feel stressed and depressed, spend on credit again and so the vicious cycle continues.

With hard work and discipline it is possible to get out of debt and more importantly, stay out of debt. While it may seem impossible to live without little plastic cards, those determined to get out of debt may have to, for awhile at least. The first step in addressing the problem is to understand emotional spending and what got a person deep into debt in the first place.

Stop Using Credit Cards

It is so easy to use credit cards when shopping. Cut up the cards, draw money out and spend the cash or use a debit card instead. The time and effort it takes will make a debtor think twice about making unnecessary purchases.

Transfer Balances to a Zero Interest Card

The debt won't go away, but at least there won't be large amounts of interest for awhile. Remember that zero interest cards are usually offered for an introductory period only. Look for a zero percent credit card where the rate applies to a transferred balance but bear in mind that some lenders charge for transferring balances. Read the fine print and do a comparison between lenders to find the best deal.

Profit from the zero percent interest by making as big a dent as possible in the overall debt.

Pay off Debts Smallest to Largest

Get rid of smaller debts as quickly as possible. Once a small debt has been settled completely, take that amount and pay it into the next card until that is paid off and so on. As balances are paid off, close off credit cards. This is the snowball method of reducing and eliminating credit card debt made popular by Dave Ramsey in the "Total Money Makeover".

Make Micro Payments

By getting an extra part time job, even for a couple of hours a week and putting the whole amount into paying off credit cards, or by living frugally and putting any excess money directly back into paying off credit cards, debts can quickly be reduced.

Starting a budget and tracking expenses can help control compulsive spending. With out-of-control debts, a debt consolidation loan may help to reorganize finances and give the debtor a fresh start. Having only one bill to worry about instead of multiple bills, at a lower interest rate, can help a debtor to manage money affairs more effectively.

Debt Counseling

If debtors feel completely unable to cope on their own, it may be time to go for debt counseling. Debt counseling (credit counseling US) often involves negotiating with creditors to establish a debt management plan (DMP) on behalf of a client.

A DMP may help the debtor repay his or her debt by working out a repayment plan with creditors. DMPs, set up by debt counsellors, usually offer reduced payments, fees and interest rates to the client.

Getting out of credit card debt is not going to be painless, what debtors need to do is put a stop to habits that get them into debt in the first place, save money for emergencies and take steps to build wealth rather than debt.