Five Steps to Eliminate Credit Card Debt
Posted in The Simple Life
Updated: based on the suggestions in the comments below, from my brother, who works for a bankruptcy trustee.
As I have hinted before, financial management is not my strong suit. Most of it comes down to “out of sight, out of mind”. The bills get filed away and I tend to forget about them. Then, one day I check the bank balance and realize money is there that should have been paid towards bills. There are some cracks in the system.
If you find you have trouble getting your credit card debt under control, here are five steps that will simplify the process. I was tempted to call them five easy steps, but they do require work.
- Make a budget. The first is a biggie! Before you can figure out how to pay down your credit card debt, you have to know how much you have available to pay on your debt. This post isn’t going to tell you how to budget. You can check out either of these posts for budget how-to: Hack Attack: Time to budget; 10 Ways to Simplify Your Budget.
- Once you know how much cash you have to make an extra payment on your credit cards, list the debts in order from highest to lowest. Take the extra amount and make a payment on the first (highest debt) credit card on your list.
- Pay the minimum payment on the other credit cards. Continue this practice each month until the first card is paid off.
- Combine the amount you’ve been paying on the first card with the minimum monthly amount for the second card and pay that on the second card. Continue until that card is paid off.
- Continue in the same fashion with each subsequent card, increasing the payment amount every time a debt is paid off.
Once your credit card debt is eliminated, take the freed-up cash and start building your savings and investments.
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Comments
So, Mr Insolvency Expert (my baby brother 
), if you’ve got two cards with approx. equal debt, do you pay off the one with higher interest rate?
We have written some useful information on how to reduce your credit card debt at http://freshfinance.net/blog/
Definitely a good plan of action, even as a jumping point. I’m amazed at how many people don’t even set out a budget!
Helpful post for all that have debt problems, just like me. I also read about The Debt Snowball Plan and the IVA program. But the 5 steps you are talking about are very interesting.
I’ve been reading through a few similar blogs, I like what you have to say. IMO, credit card companies have been exploiting American consumers through unethical, yet “legal”, practices. Its a shame…
Thanks, I think all people should know how to eliminate credit card debt once and for all. I found this very helpful 
-Andrew
The best advice in this article is the last part.
“Once your credit card debt is eliminated, take the freed-up cash and start building your savings and investments”
This is the most important part. Teaches you not fall back in debt.
Thanks for the link to ‘10 Ways to Simplify Your Budget’ - very useful!
Many times people are overfaced when it comes to budgeting because of overcomplicating matters. There’s no need to create 20 different spreadsheets tracking your income! A simple ‘money in’, ‘money out’ will do just fine.
Thanks again!
While that’s a good plan, the first rule of debt reduction that is emphasized in insolvency practice is pay of the biggest debt first. The bigger the credit card debt the more interest that accrues and the harder it is to pay off in the long run.