When I was younger, around 19, I got my first credit card offer in the mail. To a freshly-made adult, I took that sign as my step into the real world. Two years later, I was drowning in credit card debt because I was a young struggling college student living on credit cards. Big fucking mistake. Even better lesson learned.
Looking back, this moment in my life taught the value of fiscal responsibility. By the end of it, I had accumulated over $8,000 in credit card debt. Some of it was frivolous, but much of it was used to pay bills and necessities such as food and gasoline. And eight grand doesn't even seem like much...but to me, it was.
Credit card debt in the United States is nearly mandatory.The Federal Reserve says the average American household holds $54,000 in credit card debt.
Perhaps you are in debt and looking to get out of it...I've compiled the methods that I used to pay it all off!
Stop Using Them
This seems so silly I wasn't sure if I should put it, but that was the main reason it tops the list. Stop using the credit cards. If you cannot live (really live) without them, then you have dug yourself quite a hole. Unfortunately, the only way up is through ceasing the accounts. Call the creditors and close all the accounts that you can. Talk to them about paying off the debt through consolidation or debt-reduction.
If you are using credit cards for food and shelter, contact your local Department of Health Services to find out about social benefits that you qualify for to help alleviate your struggles. It is okay to admit you cannot make ends meet.
If you find yourself in debt and are able to stop using them without harm, then do it. Cut them up right now. That ends your ability to use them in the future and enables you to begin the repayment process.
Transfer debt to the lowest interest rate card, if you can
If you have this trick in your pocket, then you need to get on the phone and use it. Find your credit card with the lowest interest rate and transfer as much other credit debt over to it as possible. This will enable you to stop accruing high interest elsewhere and consolidates as much debt in one place.
Pay debts smallest to largest
This is one of those rules that took me years to understand. I would sit at the table staring at my bills and contemplating which one would be the best to start paying. At first I thought that paying the largest one off made the most sense because I didn't want the interest to pile up, but after much calculation it makes more sense to pay the smallest debt off first.
By paying off the smaller debt first, you can eliminate owing too many creditors which helps you raise your credit score and it gets rid of those little debts hanging around. If you do not think this is the smartest way for you, then I suggest paying the credit card off with the highest interest rate first and then start working on the other debts.
*I am not asking you to stop paying your other debts off. Pay the smallest debt or debt with highest rate first, but continue making the minimum payment on the rest of your debts.
Do it twice
See that minimum payment? Good, now double it. That is how much you should be paying on your debts. As you eliminate the smaller debts, you will not find this a problem on the larger debts. Aim to pay double the minimum payment plus the finance charge each month.
Keep the oldie
Chooses the oldest credit account that you have a keep that one shining. By keeping the longest standing credit card you can maintain a good reputation with the credit unions and help raise your credit score since credit scores are determined by longevity of relationships between the consumer and the length of time of the open accounts.
Moreover, there is no harm in keeping a credit card around for emergencies. If the oldest credit card holds a high interest rate, call the company and ask for them to lower the interest rate (explain your situation). If they refuse, choose the next card and go from there.
Credit card debt is hard to get around these days, but that is not to say that you cannot learn to use credit and then pay it off to have a great credit score. These tips should help you pay off your existing credit card debt and get you started on a better path to financial freedom.
What Else Can You Do?
Beside the above steps, I would suggest that you invest in budgeting software. The only one that I've tried is Quicken, which I've linked you to here. But if you are broke like I was, then spending $45 to budget your money doesn't sound very wise.
I have actually taken to building my own planner that includes budgeting templates. I like things in writing, rather than on a computer screen. It makes it simpler for me to see my money. I have created a simple one for you to download here, free of course! You can find more downloads in my shop.