Debt consolidation companies promise a quick fix to your credit card debt, but many consumers don't know that these services are laden with fees that can actually result in you paying more for your debt than you do now. Even reputable credit counseling services charge a small fee to provide their services. If your monthly income is such that you can comfortably pay your debts and you have the will to stick to a budget, first see if you can get out of credit card debt by yourself. Your first step is to get organized and develop a battle plan to pay down debt.
Pay Down Credit Card Debt Yourself
Step 1
Gather up all of your credit card bills and take them to your desk or a place where you can work quietly. If you have a computer with accounting software, this might be a good way to track your progress, but a pencil and paper work just fine too. Create a list of all of your credit card accounts, the balance on each account, your current minimum monthly payments, and the annual percentage rate (APR) on each card. Highlight the accounts with the highest APRs. Also find some way to flag the accounts with the lowest balances.
Step 2
Decide on a plan of action. The financial experts at Credit.com indicate there are two methods of getting rid of credit card debt. Both involve focusing on one debt at a time. The first method is to pay off the credit card balance with the highest APR (the strategy also recommended by acclaimed personal finance guru Suze Orman.) The second is to pay off the debt with the lowest balance - it's all up to you. Getting rid of the card with the highest APR saves you money, but eliminating smaller credit card debts can make you feel less overwhelmed.
Step 3
Apply any extra money you have leftover at the end of the month to the designated credit card balance so that you are paying well above the minimum monthly payment required. Do this until the debt is paid in full. It's important to note that you must also continue making minimum monthly payments to all other credit card debts, notes Credit.com
Step 4
After you successfully pay off the first credit card debt, move on to the next, be it the account with the next-highest APR or the next-to-the-lowest balance. Credit.com notes that this system is helpful only if you don't incur additional credit card debt while trying to pay down your accounts. If you must make purchases, pay with cash, personal checks or a debit card. Only use your credit card to make purchases that you can easily pay off in one to two months.
Tips and Warnings
- Need help making a budget? The National Foundation for Credit Counseling has a useful budgeting tool on its website (see Resources.)
- If you have difficulty sticking to a budget or your income is such that it doesn't cover all of your credit card debt, don't be afraid to ask for help. The Federal Trade Commission offers some handy tips in choosing a reputable credit counselor who can help you design a better budget, help you get enrolled in a debt management plan or offer other solutions to your credit card debt.
Things You'll Need
- Your credit card bills
- Pen & paper OR
- Computer & accounting program (such as Excel)
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