In Part 1, we teach you how to pay down credit card debt and how to avoid it in the first place.

Credit card debt just won’t go away. It’s become a part of the American equation — baseball, apple pie and debt.

As we recently reported, America owes $642 billion on credit cards. But paying back debt isn’t easy. Maybe you lost a job, have medical issues or are married to a spouse who loves plastic.

To make matters worse, most people don’t know the tricks to paying down their debt. Why should they? The average American isn’t a financial expert.

But we can teach you how to be one. For Financial Literacy Month, here are five dos and don’ts to help you pay off your debt.

1. Don’t do this: Take out a payday loan

A payday loan is a short-term lending tool. The interest rates can range from 300 percent to 600 percent or more.  Its only chance of being effective is if you have an emergency situation that you can’t pay for (like when your car breaks down), but you know you’ll have the money to immediately pay the loan off on time.

If you don’t pay on time, the lender rolls over the loan and charges you fees. The fees can rack up until they’re higher than the original loan. Then you’re in more debt than before.

Do this instead: Consolidate your debt to one-low interest rate card

By doing a credit card balance transfer, you’ll avoid paying additional interest rate fees and have only one monthly payment instead of several. However, the possible drawback is that it may take longer to pay off, since you are making a lower monthly payment. But remember, the low interest rates only last for a set amount of time. It could be up to a year. During that time do not charge on any of your cards. You’ll only accumulate more debt.


2. Don’t do this: Skip other monthly payments

Ignoring your mortgage, rent or car payments puts your home and vehicle in jeopardy. If you don’t have a car, you can’t get to work. If you don’t have a place to sleep, how can you or your family survive? You’ll have to depend on family, friends and neighbors. These drastic measures just aren’t worth the consequences or the heartache.

Do this instead: Contact your creditors 

Most people don’t know that their creditors are sometimes willing to help them out. Simply call the credit card company and be honest with them. Explain that you sincerely want to pay your bills but just don’t have the money. Ask for a new payment plan that fits your budget. You may be surprised. Creditors want their money, and if you show the desire to pay, they might work it out.

3. Don’t do this: Only pay the minimum

You’re wasting money. Here’s an example: Say you have a balance of $1,500 on a card with an 18 percent interest rate. If you only pay the minimum amount each month, by the time you have a zero balance you’ll have paid $1,760 in interest charges. And if you have more than one card with a high balance, that’s thousands of dollars gone. You might as well take your paycheck and give it to the creditors.

Do this instead: Make more than the minimum payments

The most obvious solution is the best one. Just $10 or $15 more makes a huge impact. And if you don’t have the money, find it. Gather all your monthly bills — everything from rent to the money you spend on coffee. Then start cutting out what you don’t need, like cable TV packages, phone services, and money spent on going out. You’ll be surprised at what you can slash from your budget.

4. Don’t do this: Take out a high interest rate loan

The problem here is that the loan could have a higher interest rate than the average of your credit cards. Again, you’ll be wasting money if that’s the case. The single monthly payment the loan brings is convenient but it’s not worth it. There’s also the chance of defaulting on the loan, which will make a bad situation worse.

Do this instead: Pay off the highest interest rate card first

Go with the highest card first and work down. Don’t stop paying on the other cards — just allocate more money for the one you’re aiming to wipe out.

5. Don’t do this: Use a debt settlement company

Not all debt settlement companies are reputable. The FTC has found that less than 10 percent of consumers who try debt settlement programs complete them successfully.

Be wary of debt settlement companies who demand payment upfront. Some will also insist that you stop paying your creditors back, but after a couple of months, collectors start calling. And they’re not happy. If it continues, then the creditors could charge off the accounts, which means they close them and put a negative entry on your credit report. That entry wrecks your credit score for years.

Do this instead: Enroll in a debt management program

A debt management program can be a good bet, depending on your situation. First, you speak with a certified credit counselor. The counselor then speaks on your behalf to your creditors. If they agree to consolidate your loans into one monthly payment, the counselor will also ask for any fees or penalties to be eliminated.

In many cases you won’t be allowed to use your credit cards, but that’s a good thing. It forces you to think differently about money. You can only spend the money you have in your bank account.

We hope this advice makes paying off your credit card debt less painful and more efficient. Look out for Financial Illiteracy Month Part 2 next week.

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Meet the Author

Brian Bienkowski

Brian Bienkowski


Bienkowski is a contributing writer and is the face of's 'By the Numbers' videos.

Budgeting & Saving, Credit & Debt

credit card debt, credit counseling, credit repair

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Article last modified on July 3, 2018 Published by, LLC . Mobile users may also access the AMP Version: Financial Illiteracy Month Part I: Here's How NOT to Pay Off Your Credit Card Debt - AMP.