Disclosure: This post may contain affiliate links, meaning I get a commission if you decide to make a purchase through the links, at no cost to you. Please read the site disclosure for more information.
Mounting credit card balances can make you feel like you are drowning in debt. Purchases you made months ago can haunt your financial situation today.
The great news is that there is hope. If you aren’t sure how to tackle your mounting credit card debt, the following tips can help you to get yourself going in the right direction.
1. Stop Using Your Credit Cards For Now
If you want to start chipping away at lowering your credit card balances, one of the best things you can do is to stop using those credit cards until you have them paid off. That will help keep the growing interest from past purchases to a minimum. If you keep adding more purchases while you’re trying to pay the balance down on a card, you’ll never get anywhere. You’ll have to then payoff the additional purchases plus interest on top of that.
2. Determine Which Debt to Pay Off First
There are a few different ways you can choose to tackle your credit card debt, depending on your situation.
One popular method of reducing debt is known as the avalanche method. With this strategy, you start paying your credit cards off from the highest interest rate to the lowest. The avalanche method will help you to save money by paying less in interest overall.
What if your credit card with the highest interest rate also has a large balance? If this card will take a while for you to fully pay off, you don’t want to lose motivation before it’s paid. If you think this might happen to you, you can choose to use the debt snowball method. With this method, you start paying off your credit cards from the smallest balance to the largest. Even though the card with the lowest balance might not be the one with the highest interest rate, it can help you to build motivation and momentum by getting rid of at least one balance.
3. Evaluate Your Spending
To free up some money to use for paying down your credit cards, look for ways you can free up or save money.
- Cancel any memberships or services that you don’t need or that you can live without while you are paying down your debts.
- Plan more home cooked meals instead of eating out.
- Buy generic instead of name brands.
- Be more intentional with your utility use. Lower your heat a few degrees in the winter and don’t run the air conditioning as much in the summer.
- Reduce entertainment expenses.
- Consider making homemade gifts instead of buying expensive ones.
4. Create a Budget
Creating a budget will help you to get a better handle on your income end expenses. It will help you to see how much you’re really spending and how much you have available to pay down your credit card debt. Start by determining your monthly income, expenses, and financial goals. Check out my related 7 Steps to Create a Personal Budget blog post for help with creating your budget.
There are many tools that can help you with budgeting. One of the ost customizable digital budgeting tools available is PocketSmith. They have an app that can help you with planning and tracking your budget. Use my PocketSmith link if you’d like to save 50% off your first two months of the their premium plan.
If you prefer a tried-and-true, non-digital method of budget tracking, the Clever Fox Budget Planner is best-selling budget planner that comes in many different color options.
5. Negotiate Your Credit Card Interest Rate
Credit card interest rates can be incredibly high, some more than 20%. Interest calculated at high rates can pile up fast. It may be worth calling your credit card company to ask for a rate reduction, especially if you have been a loyal customer for many years. The worst thing that could happen is that they say no, but if they say yes, you could potentially save hundreds or thousands of dollars, depending on your balances.
6. Seek Help if You Need it
If you are feeling overwhelmed and unsure of how to implement these tips, you may want to seek help from a credit counseling agency. A credit counselor can work with you to improve your financial situation and help you gain control over your money.
Be careful when selecting a credit counselor to find one that is reputable and won’t take advantage of you. A reputable agency should send you free information about the services it provides without needing an details about your situation. Check out this article from the Federal Trade Commission for additional guidance on selecting a credit counseling agency: Choosing a Credit Counselor.
7. Make More Money
Consider temporarily adding a second job or “side hustle” to help create some additional income to help pay down your credit card debt. You could drive for Uber or Lyft, deliver groceries with Instacart, or resell some of your stuff. There are also lots of ways to make extra money online. Check out my 5 Websites to Make Money With Print on Demand blog post.
Earning extra income from multiple sources of revenue can help you learn new skills and gain confidence with paying down your debt.
8. Continue to Improve Your Financial Habits
If you don’t work on improving the behavior that led you into credit card debt in the first place, you might pile up more credit card debt in the future. Stick to the budget you’re created and re-evaluate it periodically.
Once you’ve tackled your credit card debt, you can work on future money goals, such as creating an emergency fund, saving for a car, or investing for retirement. You might consider adding Dave Ramsey’s best-selling book The Total Money Makeover: A Proven Plan for Financial Fitness to your reading list. To recap, getting out of credit card debt doesn’t happen overnight, but with careful planning and all of the tips above, it is definitely possible. The most important thing you can do is to get started!
Check out some of my other posts on saving, making, and investing money:
- 7 Steps to Create a Personal Budget
- Financial Checklist: 10 Things to Do Before Year End
- 7 Habits of Successful People Who Are Never Broke
- 17 Ways to Save Money This Fall
- 5 Websites to Make Money With Print on Demand
- Why Should I Invest in an IRA?
Disclaimer: This information is intended for educational purposes and is not tailored for the needs of any specific investor. It is important to conduct your own analysis and research before making any investment. It is recommended to independently research and verify or seek financial advice from a professional in connection with any information on this website before using it to make an investment decision or otherwise.