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How to Cut Credit Card Debt

by Jeremy Holcombe

When you’re young, credit cards seem like an easy solution. Make all of your purchases from a single source and pay a minimum amount every month, instead of worrying if you have enough for this or that. Unfortunately, over time, interest builds up, and as you get older, you find yourself buried under a mountain of credit card debt.

You’d like to be able to save up for your retirement, but you can’t until you get out of debt. You owe so much, though, that it seems impossible. Well, it’s not. But it will take some time and planning. Here are some tips for cutting credit card debt.

  1. Stop Using Credit. The very first step in eliminating your debt is to stop using your credit cards. Every time you do, you just accrue more debt and more interest. Use a debit card instead, or even cash. Once you stop building up your debt, you’ll be better equipped to start reducing it.
  2. Pay High-Interest Cards First. If you have multiple credit cards, start with the one with the highest interest rate. Building interest is how credit card debt accumulates, so by paying off the one that charges you the most, you can stop it from growing so quickly.
  3. Pay More Than the Minimum. The minimum payment on your card is designed to keep you in debt for decades. You may think that the minimum is all you can afford, but if you don’t start paying more, it’s all you ever WILL be able to afford, as the debt will just continue to build over time. Whatever your minimum payment is, double that, and pay that amount every month. You may decide to break it up into two separate monthly payments, to make it easier on your bank account. But by doing that, you’ll be able to eliminate your debt that much faster.
  4. Make a Budget. You may think you can’t afford to pay that much on your credit card every month, but a little creative budgeting can go a long way. Make a list of your monthly expenses and see what you can eliminate or cut back on. Cook at home more instead of going out. Cut your cable subscription and replace it with Netflix, Hulu, and Amazon. Figure out where you can save, then take that extra money and put it towards paying off your credit cards.
  5. Consolidate. If you have debt with multiple credit cards, it can make it that much more difficult and frustrating to pay them off. It may behoove you to look into debt consolidation. A consolidation loan takes all of your debt and turns it into a single payment—often with lower interest than you’re paying on your cards. Not only does this make it easier to pay off, but it also turns your debt into a single number: a goal you can aim for and see yourself gradually drawing nearer to over time.
  6. Don’t Close Your Cards. Once you have your debt paid off, the temptation is to close out all of your cards, to avoid falling into the debt trap again. But it’s better to keep them around and simply not use them. Maintaining your cards, particularly if you’ve had them for a while, will help you get and keep a better credit score. Don’t keep a balance on it, though. If you must use your card again, do it only for small things, and pay off the balance in full at the end of each month. This will keep your score higher and keep you out of debt.

Eliminating your credit card debt is not an easy task. It’s a long, often arduous road, that requires certain sacrifices. Once you do it, though, you’ll be better equipped to save for your retirement and enjoy your future debt free.

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