33 Tips to Dig Yourself Out of Credit Card Debt

When you have buried yourself under a mountain of credit card debt, it can feel as though you'll never get out from under it. The thought of owing so much money while being pummeled every month by high interest rates is overwhelming. But the truth is that people like you do pay off their credit card debt every year, and you can too (with a bit of discipline). Here are 33 tips to help you get through this tough time and come out the other side debt-free.

  1. First things first. Stop spending on those cards. You are only leading yourself further into debt. Sometimes when people rack up the credit card bills, they tend to shop even more to alleviate the stress associated with debt. Unfortunately, this is a vicious cycle. To make a change, you first have to admit you have a problem, and then decide to do something about it.
  2. Cut up your credit cards. For some people this is the only way to keep themselves from charging more. So get rid of the plastic altogether to avoid temptation.
  3. Do not apply for more credit cards. It may be tempting to get another card with a fresh credit limit, but in all probability you will only pile more debt on yourself. Spend only what you have in your checking account for now.
  4. Open a savings account. While you are spending only from your liquid assets, you should also be socking some away for the future. When you can’t use your credit cards for an emergency, you will have a back up savings account for those unexpected car repairs and doctor bills.
  5. Make a budget. You need to be realistic about what you bring in each month and what you spend. Chances are, you’ve been in some denial lately about how much money you really have at your disposal. So sit down and take stock. Figure out how much you must have to pay bills, buy groceries and gas, and other necessities. You can save and spend the rest.
  6. Set some financial goals. In order to get out of your present difficulties, you need to have some goals in mind. Do you want to have a certain amount paid off by the end of the year? Do you want to open a retirement fund? Decide on the things that are most important to you and get them down on paper.
  7. Pay bills first. When you get paid each week, sit down and immediately write out checks for your bills. This will ensure you have enough left over to live on and won’t feel the need to scramble for money at the end of the month.
  8. Call the credit card companies. You may be able to negotiate a lower interest rate and get rid of some of your late fees if you agree to a firm payment schedule. If you can make an agreement with them, you will have to stick with it but it could save you hundreds of dollars in the long run.
  9. Look into credit card debt consolidation. If you have debt spread out over several cards, you may be able to move your debts to a single balance transfer credit card with lower interest. But as always, read the fine print. This interest rate could skyrocket if you are late with one payment or at the end of a trial period.
  10. Always pay more than the minimum balance on your credit cards. If you only have to pay $25 per month to keep it going, pay $30 or even more. Even this small amount difference will help you to reduce your principal. Often, the minimum balance due will only cover the interest you have accrued over the last month, so if you were to only ever pay the minimum, the debt would never be paid off in full.
  11. Get copies of your credit report. There are three credit bureaus that hold records of your credit history—Experian, Equifax, and TransUnion. These companies will provide you with a free credit report each year. So take advantage of this and see what the credit card companies and other financial institutions are being told about your credit history. The Federal Trade Commission recommends Annual Credit Report to obtain your free reports.
  12. Dispute any errors on your credit report. When you receive a copy of your credit report from any or all of the major reporting agencies, you should receive a dispute form that allows you to dispute an entry. Go through all areas of the report and write to the company if you find a mistake. Not reporting mistakes could cost you.
  13. Find out your credit score. When you get your free copy of your credit report, you should also be able to get your credit score for a small fee. This score will often determine your eligibility for loans and future credit cards. Knowing what your credit score is, and understanding how to fix it, will help you face your financial problems more confidently.
  14. Avoid credit repair companies. Certainly don't believe everything they promise. In general, these companies are only after your money. The nonprofit credit counseling firms range from ‘reputable’ to ‘Scam City, USA’, but if someone asks you for hundreds of dollars to fix your credit, walk the other way.
  15. Do not raid your retirement. This money is your absolute last resort. Perhaps the only reason to draw from it is if you are truly going bankrupt. Which brings us to our next tip.
  16. Look into all your options before filing for bankruptcy. It may seem like the easy way out, but if you could pay off your debt with a reputable counseling service or through an agreement with each company, your credit will be much less damaged down the road.
  17. Avoid getting a home equity loan or second mortgage to pay off credit card debt. There are other means of paying off credit card debt slowly and surely without jeopardizing your home.
  18. Resist the temptation to apply for bank loans to pay off credit card debt. This will only postpone the problem. Instead, get with the credit card companies to negotiate lower interest on your existing debt.
  19. Cut out superfluous expenses. Remember that budget you made? Chances are you can cut out $100 or more of expenses each month without even noticing what you're missing. Putting that extra money toward a better life will feel better than ‘buyer’s remorse’ for the junk you used to buy.
  20. Pay with cash—not a debit card. People tend to spend less when they use cash as opposed to plastic (even ‘debit’ plastic). Consider it a psychological aid to counteract any impulse buys you might make.
  21. Qualify for future credit cards by making payments regularly. A good payment history is the best credit you can get. If you can pay your car loan, your mortgage, and your other bills on time, this looks good to credit card companies who previously may have been hesitant to offer you a line of credit.
  22. Create a holiday fund. Most credit card debt is accumulated at the holidays when people spend beyond their means. So start early in the year creating a fund that cannot be touched until December. Most banks now offer this type of interest bearing account. You will deposit money throughout the year and then have a nice nest egg to spend at the holidays without racking up more debt.
  23. Don’t shop when you are angry. In fact, don’t shop when you are feeling any strong emotion. You will be tempted to spend money you don’t have to make yourself feel better.
  24. Have some savings automatically deducted from your paycheck. Most companies allow this service. You can have anywhere from one to five percent of your paycheck sent directly to a savings account. You probably won't miss it, and it can add up quickly.
  25. Don’t avoid the phone calls. Most people let the answering machine get the calls from collectors. Try to talk to these people and set up some sort of payment plan so they will stop calling. Setting up a deal will help relieve a lot of stress as well.
  26. Keep good records. When you get correspondence from credit card companies, keep a record of what you do in response. Write down dates and times of phone calls along with details of payment arrangements.
  27. Get organized. Find a central location for all your bills. Keep the most current bills in a place where they are easily accessible. Also create a calendar of your bill due dates to stay on top of deadlines.
  28. Reward yourself. When you pay off a credit card or other bill, set up a reward system for yourself. Go on that spa day you have been dreaming of or take the guys out for a game of billiards. (Or even better, do something fun that doesn’t cost anything!) Knowing you have a reward waiting will give you extra incentive to keep paying down the debt.
  29. Be polite. Remember that you are the one who got yourself into this mess. The collectors and credit card companies are only doing their jobs.
  30. Be patient. Your debt will not go away overnight. You may be paying on this debt for months or even years. But when you finally pay it down, you will have a great feeling of accomplishment, not to mention a cleaner credit history.
  31. Be persistent. Don’t give up after a few months of making regular payments. You may feel like you aren’t making much of a dent in the total amount owed, but even $5 or $10 can make a big difference in interest payments down the line.
  32. After six months, get your credit reports again. You should do this at least every six months or so. Order a report from one credit bureau at the beginning of the year, another report from a second bureau a few months later, and a third from the last agency. You can stagger the free reports throughout the year so you can check your payment progress. Make sure that credit card companies are reporting your on-time payments.
  33. Ask for help. If you have relatives or friends who have gotten out from some deep debt, ask for their advice and experience. And don’t hesitate to take advantage of all the great credit repair resources online at the Federal Trade Commission.

Got any other good tips you’d like to share? Leave a comment.

Comments

Todd said:

That's a great load of tips there!

I can really vouch for number 8 "Call the credit card companies." They seem to knock down rates with minimal prompting.

Tim MMF said:

Great tips... My favorite is "Cut out superfluous expenses." I just like the word superfluous! ;) Great post!

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