How to Get Rid of Credit Card Debt

Eliminate Debt without Declaring Bankruptcy

Nov 12, 2009 April Bowles

Eliminate credit card debt without declaring bankruptcy and ruining your credit score by cutting back on spending and paying off debts with the highest interest rates.

When people find themselves in over their heads with credit card debt, they sometimes consider declaring bankruptcy. However, paying off credit card debt without declaring bankruptcy is much better for one’s credit score and financial future.

Cut Back on Spending to Get Out of Debt

The first step someone who is in debt needs to take is to immediately cut back on spending. Don’t put another purchase on the credit cards. If it can’t be paid with cash or a debit card, don’t buy it. Tally up all monthly bills including rent, mortgage payments, food costs and all other necessary purchases. Figure out how much money is coming into the household per month and how much needs to go out for the monthly bills. How much is left over? Most of that money needs to go into paying off credit card debt.

Calculate the Amount of Credit Card Debt

Find the copy of last’s month credit card bills and open up an Excel spreadsheet or grab a pen and paper. Make note of all the balances, the interest rate for each card, and the minimum payment. Add up the minimum payments for all the credit cards to get the base amount that needs to be paid each month. Hopefully it’s higher than the amount leftover after monthly bills. Some people skip this step, because it’s hard to be honest about large amounts of debt. However, this step is critical to be successful in eliminating debt.

Pay Credit Cards with the Highest Interest Rates

To get out of debt, debtors must pay more than the minimum payment required. It can take years to pay off even low amounts of debt if someone is only willing to pay the minimum. Decide how much more can be paid on credit cards each month and put it towards the credit card with the highest interest rate. Pay that credit card off first. Once that credit card is paid off, put the monthly amount paid on that credit card toward the credit card with the next highest interest rate.

For example, Sally has three credit cards. The first one has a balance of $1600 and a 9% interest rate, the second has a balance of $2500 and a 5.5% interest rate, and the third has a balance of $3700 and a 21% interest rate. Sally’s minimum monthly credit card payments are $50 each, but she is able to pay $400 each month on her credit cards.

Sally should make minimum payments on the first two credit cards with the lower interest rates and put the extra $250 toward paying off the third credit card with the highest interest rate. In total, she would be paying $300 towards the third credit card. When she has paid off that debt, she should pay off the credit card with the second highest interest rate. She would then be able to pay $350 toward that card and $50 toward the credit card with the lowest interest rate.

Contact Credit Card Companies and Negotiate

Answer the phone if credit card companies call. Dodging their calls will only make the situation more stressful and hurt a credit score when it’s sent to a collection agency. In fact, call the credit card company and try to negotiate a lower interest rate. They may say no, but it doesn’t hurt to try.

Another option is transferring a high interest rate credit card balance to another card with a lower interest rate. If Sally from above had a credit limit of $7000 on the card with the lowest interest rate, she could transfer the balance from her third credit card with the highest interest rate to the one with the lowest interest rate. Opening up new credit cards with lower interest rates can backfire and lower one’s credit score, so this isn’t a great option.

It takes time and effort to pay off large amounts of credit card debt, but it’s possible if someone is willing to cut spending, add up the amount of debt, pay off credit cards with the highest interest rates first, pay more than the minimum and try to negotiate with credit card companies.

The copyright of the article How to Get Rid of Credit Card Debt in Personal Budgeting/Finance is owned by April Bowles. Permission to republish How to Get Rid of Credit Card Debt in print or online must be granted by the author in writing.

How to Eliminate Credit Card Debt	Eliminate Debt without Declaring Bankruptcy	Lower Credit Card Interest Rate
Negotiate with Credit Card Companies	Ways to Cut Spending