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According to Lending Tree, Americans held $925 billion in credit card debt in the third quarter on 2022. With over 83% of Americans owning at least one credit card, conquering credit card debt is at the top of a lot of people’s minds.
Though seeing your way through credit card debt can be challenging, it is not impossible. Here are the steps you may need to take to take to breakout from your credit card debt and make headway on your financial goals.
Evaluate Your Current Credit Situation
The first thing you have to do is to take a hard look at your finances. Find the balance, interest rate, and minimum monthly payment of all of your credit cards.
We encourage you write out all of this information, or to make a spreadsheet. This process is going to take a lot of documentation, so start now.
Once you know where you stand in your credit card debt, you’ll have a solid foundation to move onto the next steps of conquering credit card debt.
Weed Out Unnecessary Charges
Cancel any unnecessary subscriptions and automatic payments as soon as possible.
To do this, go through your credit statements to find repeat purchases. This sill stop your credit balance from growing right under your nose.
While you’re examining your credit, take the time to review your spending habits. In the moment of purchase, using a credit card can lessen the blow to your finances. But sometimes that post-purchase sting is an important way to recognize the loss of your cash. When you’re constantly shopping with a credit card it can be hard to realize how much you’re actually spending.
Take an audit of your spending and make some edits wherever you can.
Give Your Credit Companies a Call
Call your credit card companies to see if you can get a lower interest rate on you cards. Conversely, call your credit companies to see if you can get a lower minimum payment on your cards.
This will ease the stress off paying off your bills. When you’re accruing interest too quickly on your debt or can’t make your minimum payments in time, you might be more likely to use a different credit card to compensate.
See what accommodations your credit companies can make; this is going to help you in the long run.
Consider Debt Consolidation
If you can’t see the light at the end of the tunnel on your own, then debt reduction plans may be your best bet. Be mindful that debt reduction plans are not one size fits all, what works for someone else’s debt might not work for yours.
Personal Loans
Some people use a personal loan to consolidate their credit debt. This could be a suitable option if the personal loan has a lower interest rate than your credit cards.
If you qualify for a lower interest rate than what’s on your cards, getting a debt consolidation personal loan could make a huge impact on how you pay your debts.
0% APR Balance Card
If you have good credit, you may be able to qualify for a 0% APR balance transfer. This will allow you to pay off your balance without accruing interest.
This is an optimal option for paying off your debts, but it can be difficult to obtain. See if this option is available on your cards with the highest interest rates and work your way down to your lower interest debts.
Try a Debt Management Company
There are several debt reliefs companies that offer low-interest debt consolidation and help you simplify your debt payments.
You can also consider a debt relief program. Companies like National Debt Relief will help you solve unmanageable debt in the pursuit to protect you from bankruptcy. This option may lower your credit score for some time, but it could provide you with a clean slate to progress on your financial goals.
Make a New Budget Plan to Pay Off Debt
Once you have made any possible steps to make it easier to pay off your credit cards, it’s time to make a budget plan to transform your finances so you don’t get caught in serious debt again.
Your budget should go beyond a repayment plan. Do whatever necessary to cut your expenses and live a more fugal life until your debts are paid off. Your financial goals should be SMART. SMART goals are specific, measurable, achievable, realistic, and timely.
Make your goals within reason and set an expectation on when they will be achieved to keep yourself on track. Here’s what a credit debt repayment SMART goal may sound like.
Pay off 45% of debts from my high-interest credit debt by June 1, 2023.
See? This goal isn’t a loosey-goosey commitment. It is a short-term, specific commitment to yourself and your financial future.
When paying off your debts, it may be best to start by paying off your debts with the highest interest rates first and work your way down. This method of debt repayment is called the debt avalanche.
Simply creating a goal is not the only step to seeing them through. You must regularly check in and track your progress to stay on top of business.
Stay on Track
The most important part of your debt payment journey is to create lasting habits that will keep you out of debt. Here are three healthy finance habits that you should live by beyond your debt repayment journey.
- Vigilantly keep track of your expenses and spending
- Live within your means and pay yourself first by contributing to your savings
- Use your credit wisely