Smart Strategies To Get Out Of Credit Card Debt
1. Target just one card first. If you’re carrying balances on multiple cards, it’s a long slog to wipe out those debts. So give yourself a boost of instant gratification right from the start, says Mary Ann Campbell, a certified financial planner in Little Rock, Arkansas. Ask yourself: What short-term financial goal will make me feel as though I’m making meaningful progress on debt reduction?
If your answer is “Having one card totally paid off,” then throw as much money as you can toward the card with the lowest balance first, says Curtis Arnold, the founder of CardRatings.com, a credit card comparison site. If your answer is “Boosting my credit score,” then tackle the card with the highest utilization rate . “Since your score takes a hit if you use more than 20 percent of your available balance, bringing the utilization rate down just 20 percent could significantly increase your score,” says Arnold. And if your answer is “Paying less in interest,” then the tried-and-true method is to pay off the card that has the highest interest rate first.
Getting Paid Out For Unused Pto
King also leveraged payouts from her job as a curriculum and course developer for unpaid PTO. “With my company, anything over 80 hours we can sell so I would hoard PTO,” King said. “If my kids had appointments, I would just stay extra throughout the week to make up for the hours.”
King told Insider, however, that she does not often recommend this strategy to people, and admits that this particular method can be extreme.
That said, whenever she would accumulate 20 to 40 hours of PTO that she could sell back, she would get anywhere from an extra $500 to $800 in return.
Set Goals And Timeline For Repayment
Once youve created a monthly budget, its time to plan for the future.
If you have $30,000 in credit card debt, you also need a timeline for paying it off. This will keep you on track and also help you maintain a budget. Set goals that are realistic. If you aim too high and cant reach it, you may get frustrated and give up. If you aim too low, it will take you years, or even decades, to achieve the goal.
You may want to begin with a short-term goal on a short timeline pay down a certain amount of the balance in 12 months. Once you achieve that goal, you can make adjustments and set the longer end goal. Seeing the progress you made in 12 months can be a great motivator for overall success.
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Your Debt To Income Ratio
This is a commonly used figure that puts your debt into perspective relative to how much money you earn.
A debt-to-income ratio is often calculated different ways. For example, when you apply for a mortgage, the banks calculate your DTI as the percentage of monthly debt payments of your monthly income.
Although not one of Farrells ratios, I like to calculate a debt ratio as the amount of total debt as a percentage of gross annual income.
- Example 1: You earn $50,000 a year and have $25,000 in debt. Your Debt Ratio = 0.5.
- Example 2: You earn $100,000 and have $250,000 in debt. Your Debt Ratio = 2.5.
This gives you a benchmark for how indebted you are .
In case youre wondering, my debt was way above 2.0 for a while.
So whatever your debt ratio, dont despair. If yours is way up there, it just means you have some work to do.
How To Reduce Credit Card Debt Fast
If you’re particularly struggling with high credit card balances, you’ll want to bring them down as quickly as possible because credit cards tend to charge much higher interest rates than personal loans, student loans and other types of debt.
In addition to measures such as adding income and trimming your budget , the following steps can help you get your credit card debt under control.
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Tip #: If One Solution Isnt Working Try Another
If one option for repayment isnt working, you should move onto the next. Dont wait for the first solution you try to fail.
As soon as you feel like theres trouble on the horizon, adjust your strategy. The goal is to avoid missing payments or falling behind.
Once your creditor writes off a debt due to nonpayment, it limits the options you have for relief. No matter what, if your debts are current, you have options for eliminating them quickly without damaging your credit.
Dealing With Credit Card Debt: How To Get Debt
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If you’re saddled with credit card debt, you’re not alone the average American household has more than $6,000 in revolving credit card balances. But with a good payoff plan, you can be debt-free sooner than you think without hurting your credit. Let’s dive in!
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How I Slashed $25000 In Credit
A few years ago, my long-term partner and I were living in his home country of Canada, and I put a lot of time and money into obtaining permanent residency. But relationships sometimes dont move forward as planned. I returned to the U.S. in the spring of 2019 with only a truck full of belongings, my dog and about $25,000 in credit card debt.
After considering several options, I knew my best choice was to eliminate the debt while restarting my freelance business so I could move on with purpose. So I took what might look like drastic measures to many.
Heres how I slashed my credit card debt to zero over two and a half years:
The Debt Volcano Method
Christine Luken, also known as The Financial Lifeguard, has a story about how she coined Debt Volcano. When she was dealing with debt after her divorce, her dad asked her which debt pissed her off the most.
This struck a chord with Luken, who later wrote a book called Money is Emotional. Her name for the strategy her father helped inspirepay off the debt that pisses you off the most firstbecome Debt Volcano.
Learn more about Christine Lukens philosophy on money and debt in this interview:
Lexi: Over the past 12 years, Christine Luken has coached hundreds of high-earning professionals to pay off staggering amounts of debt and massively increase their net worth. You may know her as the Financial Lifeguard, the founder of the Financial Dignity Movement, and the author of Money is Emotional: Prevent Your Heart from Hijacking Your Wallet.
Were here with Christine today to talk more about the emotional side of money.
Lexi: Hi christine, thanks for joining us!
Christine: Hi, thanks for having me! Im so excited to be here.
Lexi: Can you tell us a little bit more about your story and your past money experiences?
was even higher than what it would be for the average person because I was
someone who should have known better.
Lexi: You help people envision their financial future. One of the things you talk about is reprogramming the subconscious mind to focus on the things we want. How can someone start the reprogramming process on their own?
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What To Do If Youre In Over Your Head
If your credit doesn’t qualify you for any of the options above and you can’t get ahead on your payments, you have a few options:
Get credit counseling. You can sign up for a free consultation with a credit counselor who can help you understand your options and put together a budget. Ensure your counselor has the Department of Justice’s seal of approval.
Declare bankruptcy. It’s a last resort, but if nothing else is working, you may need to .
Consider The Debt Snowball Approach
The debt snowball method is a repayment plan that focuses on how you can benefit from a psychological boost while paying off your debt.
Heres how it works
First, list your debts by balance, from smallest to largest. This will give you an idea of which ones you should tackle first.
Using this approach, youll throw every penny you can at the smallest debt. For all the other debts, make only the minimum payment on each one.
When the smallest is eliminated, roll that entire payment to the next smallest debt. Continue to make only the minimum payment on all the other debts, and repeat until each debt is paid in full.
Advocates of this method see the quick progress of paying off your smallest debts first as a motivator to keep you on track until youre free of debt.
Who should use this method
If you think youll have a hard time staying on track and want quicker accomplishments, the snowball method might be a good payoff plan for you. Just keep in mind it may result in paying more interest over time. This is because youll be paying toward the smallest balance first instead of focusing on the interest rate. For a more cost-effective debt payoff strategy, consider the debt avalanche method.
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Become A Better Money Manager Too
If youre struggling with debt because no one ever showed you the right way to manage your money, we can help. Consolidated Credit has the resources that can help you understand how to be successful with your finances. Nip your spending problem in the bud now.
Call Consolidated Credit today at to speak with a trained credit counsellor or get started now with a request for a Free Debt Analysis.
Thank you for your application!
Consolidated Credit has helped more than 500,000 Canadians in 15 years find relief from debt. Now were here to help you.
A Trained Credit Counsellor will be calling you at the number you provided. Theyll complete your free debt and budget analysis, then discuss the best options for getting out of debt with you. If you qualify to enroll in a debt management program, your counsellor can also help you enroll immediately.
For immediate assistance, please call:
Heres What I Would Do
I could go either way help them or not help them. My thought process would be:
What kind of kid are they? Whats their character?
- If theyre rude, arrogant, inconsiderate or think the world owes them something, Id probably lean toward letting them struggle. Im not saying I wouldnt help them, but their character would factor into my decision. Yes, you should love your kids unconditionally. But that doesnt mean you should just be giving away your hard-earned money blood relatives or not especially when theyre not a very nice person.
- Are they kind, caring, generous and hard-working? If so, Id be much more inclined to offer my financial assistance with this kind of son or daughter.
How did they incur the debt?
Assuming Im going to help out my son or daughter financially, the next question would be, Do I offer the assistance as a gift or a loan?
For me, Im not going to mess around with a loan for the reasons described above. Im just going give them the money to pay off their debt. No strings attached. Life is short and I believe if you have the financial ability to help someone out , then you should just help them. Period. No lectures or wagging the finger.
Depending on the exact circumstances, I might offer a bit of advice or recommendations regarding what Ive learned about personal finances over the years. But Id keep it short and sweet.
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I Consolidated My Debt
When I found the right balance transfer offer, I combined debt from as many accounts as possible to stay under the maximum amount available for the balance transfer. This way I had one interest-free payment. In the beginning, I couldnt move all of my debt to interest-free accounts. I had a few cards with remaining balances. Those cards were my first target: Pay off the accounts that still had interest tacked on to the balance. It didnt take long to cross those accounts off the list.
Going From Deep In Debt To Debt
Make no mistake about it — theres no magic bullet to wipe out over $25,000 in credit card debt. Even with balance transfer cards, youll need to be diligent about paying as much as you can every month, and the process could still take years.
But this method does help you in a few key ways:
It dramatically cuts down how much interest youll need to pay.
It gives you a clear target to pay off each time you get a balance transfer card.
It allows you to chip away at your debt and see the progress youre making as you pay off one balance transfer card after another.
If you can stick with it, this is the smartest way to pay off a large amount of credit card debt.
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The Scenario: You Cant Afford Minimum Monthly Payments And Your Accounts Are Past Due
As the CEO of Golden Financial Services, where we offer debt relief programs, obviously, Im a bit biased towards the benefits of using a debt relief program. However, when writing on our blog I cant be biased. I have to put myself in your shoes, and knowing what I know about getting out of debt, I need to then give you the best and most practical advice that I can possibly provide.
So here it is: If you can avoid a debt relief program and pay off your balances in full and on your own, do it. Debt relief programs will create negativity on your credit report in one way or another.
The best way to maintain a healthy credit report is to pay your balances down as fast as you can, and on your own. Debt relief programs can be extremely beneficial if you have high credit card balances, like over $10,000 in debt, and cant afford to pay more than minimum monthly payments. Paying only minimum payments will kill you, minimum payments will keep you paying on debt for what seems to be an eternity and your credit score also suffers when paying minimum payments on close to maxed out credit card accounts.
As shown in this image, whatever you do DONT PAY ONLY MINIMUM MONTHLY PAYMENTS.
Here are your two quickest ways to resolve $25,000 in credit card debt if you cant afford to pay at least minimum payments or fell behind on payments.
OPTION ONE Get Out of Credit Card Debt Without Paying
Proof of how you can walk away from a credit card debt without paying:
Maxed Out Cards Later Tricia Sought Help
Some people indulge in emotional spending, which is when you purchase things you dont need, hoping it will help you feel a certain emotion.
For example, an emotional spender might go shopping to self-comfort when theyre sad or to enhance their mood when theyre happy. Some people also shop out of fear of missing out . In Tricias case, shopping became a hobby.
I was nearly $15,000 in debt, just from buying things that I didnt need, Tricia said. I would go to the mall almost every weekend when I should have busied myself doing something else. It became my recreational time.
To help her get out of debt, Tricia sought help from a local financial institution.
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Hes Also Become An Advocate For Consolidated Credit
Some people are wary of debt management services and assume its going to be another expense. On the contrary, it could be part of the solution to your debt struggles.
Consolidated Credit has made it easy for me to pay off my cards by lowering interest rates and making agreements for me. I very much recommend this program!
How Much Should Your Debt Payments Be
Feel like you’ll never get out of debt?
Do you know when you want to get out debt but don’t know how much to pay each month?
The reality is debt can truly weigh you down, but take heart â with a smart plan you can escape!
This Debt Payoff Calculator reveals how much you need to pay each month in order to be out of debt by a certain date.
Perhaps you want to be debt free before you go back to college, move to a new city, or before the new baby arrives. You’ll discover exactly how much you should plan on paying each month to make that happen with the debt payoff calculator. It makes the math easy!
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