Pay off credit card debt in 3 easy steps

Credit card debt can cause big problems because the payments can be more or less, depending on how much you charge. When your balances are low, your payments are low and you usually don’t have problems. But when you over-charge, payments can skyrocket and become a serious drain on your income.

So What Can You Do to Regain Control?

3 Easy Steps to Reduce Credit Card Debt

It’s possible to pay off your debt quickly without any need to even consolidate. You just have to temporarily adjust your budget to maximize your monthly debt payments in the most efficient way possible.

Keep in mind that the cuts are temporary!

As soon as you’ve regained control, you can reinstate cut expenses. The idea is to pay off your debt fast, so in theory you can go back to normal before you succumb to that horrible feeling of “doing without.”

Think of it like one of those cleansing diets where you only eat the minimum you need to sustain your health – you can deal with it for a short time, because it’s worth it for the payoff of losing all that financial dead weight.

Step 1: Streamline Your Budget

We’re talking as bare bones as possible. Obviously you still need to eat and pay bills, but there’s likely to be a ton of things you can cut from your budget that you don’t need. You can also find ways to cut back on necessities like food, say by eliminating your dining out budget entirely and going crazy with couponing until you have a handle on your budget.

Note that you should still pay your bills, including all of the minimum requirements on your credit cards to avoid credit damage.

Step 2: Make Bigger Payments

You want to pay off one credit card at a time instead of putting a little extra to every debt you have. Why?

Almost all credit cards have a $15 limit on your minimum payment – meaning the lowest amount you would ever pay would be $15. If you start reducing all of your debts at once, you’ll end up with a lot of $15 bills to pay down at the end. So eliminating one debt at a time is more efficient.

And why pay off the highest interest rate first?

Because you’ll save money.

If you have 2 credit cards that both have a $5,000 balance, but one has 12 percent APR versus 19 percent APR you should pay off the 19 percent APR card first. Over time, the debt costs more. If you make minimum payments on both of these cards…

  • 13 percent APR will cost you $4,938 in added interest charges
  • 19 percent APR will cost $7,322

Granted you’re paying off the debts faster than just paying the minimums, but the logic still stands.

Step 3: Roll the Savings In

Here’s the good news – eliminating credit card debt gets easier and faster with each debt you eliminate. You take the money you save because you have one less debt to pay and roll that into the bigger payments you make on the next debt on the list. You gain momentum like a snowball rolling down a hill… hence the industry nickname “snowball” plan.

Special tip: Use a debt calculator to map out the time it’s going to take to pay off your debts. If you see it will take longer than 2 years, you might want to consider options for debt consolidation. You can consolidate on your own or get help from the debt relief professionals if the problem is too big to handle by yourself.