Credit card debt can be a vicious cycle that is hard to break. Financial expert Dave Ramsey reports that many people spend more money on everyday expenses when using credit cards instead of cash. The American Bankers Association's statistics reveal that the average American family owes approximately $8,000 on credit cards. Reducing your credit card debt to live within your means can be something you achieve without the aid of a credit counselor. Developing a budget and strategically paying down high-interest cards one by one can help you reduce your credit debt without outside help.
Step 1
Stop using your credit cards. This is one sure-fire way to reduce your credit card debt, because you will not be adding to the balances you carry. Pay for your purchases with cash or a check; Dave Ramsey suggests that if you prefer the convenience of swiping a card, use a debit card that takes money out of your checking account when you shop. If you do not have the money in your checking account, wait until you have saved up before making a purchase.
Step 2
Pay all of your bills on time, not just the credit card debt you are working on reducing. Utility companies and other service providers often charge fees for late payments; reducing your credit card debt will not help you save money if you are paying late fees on your other bills. Your credit score can be compromised from late payments as well.
Step 3
Review your credit card statements, if you have more than one credit card, to determine which card carries the highest interest rate. Make a list of all of your cards, with the highest interest rates at the top of the list.
Step 4
Focus on paying off the credit card with the highest interest rate first, according to financial guru Suze Orman. As you eliminate interest charges, you're reducing your credit card debt. Don't forget to make your monthly payment on all of your credit cards during this time to avoid late-payment charges.
Step 5
Work on paying off each subsequent credit card from the next-highest interest rate to the lowest, once you have zeroed out the balance on the card with the highest interest. Make payments significantly larger than the minimum required to reduce your debt more quickly. Apply the amount of money you had been paying on each previous card to the next card. For example, instead of spending the $100 per month you had been paying on your highest interest card, put that $100 toward the next card you need to pay off.
Step 6
Call your credit card company to ask for a lower interest rate while you are paying off your debt. Suze Orman stresses the importance of securing the lowest interest rate possible as a debt management tool. Your credit company may not agree to lower your rates, but you lose nothing for the asking.
Step 7
Transfer your balance from high-interest credit cards to 0 percent or other low-interest cards. Balance transfers can help you reduce credit debt by eliminating interest charges, but only if you pay off your balance within the introductory period. Rates increase exponentially after the introductory six- or 12- month period. Be sure to choose a credit card that does not charge a fee on the balance to be transferred.
Step 8
Live within your means after you have paid your credit cards in full. Credit card debt is an easy trap to fall into, and hard to get yourself out of on your own. Once you have learned the way to successfully manage your finances, stick to it to plan for your future.
Things You'll Need
- Credit card statements
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