Posted by:
Rachel Hartman

Rachel Hartman

June 25, 2015


Get Out of Debt

A high credit card balance can happen fast, and then take months to pay off, especially if your measly salary is already stretched. If you’re struggling with lingering debt, follow these steps to a debt-free future.

Face facts. Figuring out just how much debt you have is the first step toward getting rid of it. If you have several credit cards, write down the balance you’re carrying on each one. Add these together to find the total amount you owe. This may seem scary, but it’ll be worth it. You’ll know what you’re up against, and can start attacking it right away.

Develop a plan. Good news: You don’t have to pay off all of that looming debt in one month. The key to getting out—and staying out—of debt is to make a plan and stick to it. Consider your monthly income. Factor in your regular expenses; then set aside a certain amount that can be put toward the credit card balances.

Let’s say you can pay $200 a month toward credit card debt. Apply that amount to the card with the highest interest rate. Not sure which one that is? Check your accounts or call the credit companies and ask. By paying off balances with high APRs first, you’ll save a significant chunk on interest expense. And by focusing on a specific card, you’ll get rid of its balance quickly. Slashing that debt will energize you to pay off another outstanding balance, and so on.

While concentrating on one debt, remember to pay at least the minimum amount due each month on your other cards. If you are struggling to make these, call the card companies and ask if they can reduce your interest rates. In some cases, they’ll do it.

Consider transferring. Signing up for another credit card may seem counterproductive, but it can work to your advantage. Look for a credit card that offers a 0% APR introductory rate on balance transfers. This means the company will let you bring over a balance from a different card. You then have a certain time period—usually between six and twelve months—during which you won’t be charged interest on the balance.

This type of card, often called a balance transfer card, is a great option if you approach it in a disciplined way. Bring the balance from one of your credit cards to the new one. Then set up a schedule to pay off the debt before the regular interest rate kicks in. You’ll save hundreds of dollars in interest expense, and get rid of that nasty balance in just a few months.

Be card-savvy. While you’re paying off debt, don’t make more purchases on your credit cards. Once your balances ring in at zero, hold back the urge to run out and start swiping the card. Keep a credit card or two on hand for emergency purposes. Use the others only if you are sure you’ll be able to pay off the balance at the end of the month.

Continue living. Once you’ve achieved a debt-free status, simply take checks on your spending. If you feel like you might splurge, leave your credit cards at home. Some experts believe customers tend to spend less if they pay with cash, so pull out those greens for the new dress you want to wear to work. And wait to get the matching shoes till next month.