Question: How can I get out of credit card debt?
Answer: Being in credit card debt is one of the worst feelings you could ever have. For one thing, you're worried about how you'll pay back all the money you owe, especially if you're living paycheck to paycheck.
But there's also an emotional component you have to deal with. It's really common to feel like you are the only person who has seriously messed up their finances. This is far from true, of course, because anyone can end up in debt. I got into credit card debt when I got out of college and I know it's an awful feeling. But I survived and got out of debt and you will, too.
There are a few strategies to use, so we'll briefly cover each one. But first, there's a rule you must follow or none of the suggestions will work. You have to step away from the credit cards. Do not use them until you are out of debt. If you think you have a spending problem, it's a good idea to talk with a credit counselor before you start using your cards again.
Getting a Balance Transfer Card
If you still have excellent credit, you might solve your debt dilemma with a balance transfer credit card. You'd transfer your current balance that's probably on a high-interest credit card to a balance transfer card with a zero percent introductory offer. This way, you pay off your debt while paying zero interest on the balance.
But if your debt has done a number on your credit score, then this might not be an option for you. Next, you might consider a personal loan.
Consolidating Your Debt with a Loan
Even if you don't have great credit, you still might get approved for a personal loan that will consolidate your credit card debt. The benefit is that you'll have, most likely, a lower interest rate than the one you currently have. This will help you save money on interest.
Sure, you won't get a zero percent APR, but right now, if you can pay off your debt and save a few bucks while you do, that's a good choice. But what if you can't qualify for a personal loan at a decent rate? No problem. You'll just have to do this the old-fashioned way.
Debt Payoff Strategies
If you only have debt on one card, that's great. Take a look at the amount and figure out how you can pay more than the minimum payment. Review your budget and slash expenses. Any extra cash you "find" will be added to your minimum payment. Paying more than the minimum payment is key. Your goal should be to double the minimum payment, if possible.
If you have debt on more than one credit card, then make a list of the balances and the APRs for each card. In this situation, you also need to search for extra cash in your budget so you can add it to the minimum payment of your target debt. You'll choose the payoff order of the balances based on the payoff method you choose.
Here are two common methods for paying off your debt: the snowball method and the avalanche method. The snowball method targets the debt with the smallest balance first. You put your credit card debts in order from smallest to largest balance, regardless of APR.
Then you start with the smallest debt and with the extra money you find, you add that to the minimum payment. You'll continue making minimum payments on all the other card balances. You pay more interest with this method. But if you feel you need an emotional boost to stay on track, then this method should be considered. Paying off balances more quickly is a very good feeling.
Now, the avalanche method starts with the balance that has the highest APR. So your list starts with the highest APR and goes down the lowest APR. This method will save you the most money because you pay less interest. If saving money gets you excited, then this is the method for you.
So pick the method that you think will lead to success. Track your progress, too. As you see your total debt amount start to decrease, you will feel very energized. This will motivate you to keep going. And then, you'll be on your way to financial freedom.