Credit cards might seem like a harmless way to afford luxuries or tide you over until pay day, but things can soon spiral out of control. Before you know it, you’re staying up all night worrying about your finances and wondering how you can get out of credit card debt.
Sound familiar? Debt can ruin your credit rating, keep you trapped in a job you hate, and even trigger depression. Trust me. I’ve been there.
But don’t worry!
Even if you have reached the point where you dread looking at your credit card statements, you can still conquer your debts. It’s time to take back the reins and learn how to get out of credit card debt once and for all.
How To Get Out of Credit Card Debt – 12 Top Tips
Here are a few money-saving tips that can help you pay off your debts as quickly and cheaply as possible:
1. Work Out Your “Why”
Knowing why you want to get out of credit card debt will give you the motivation to take action and help you overcome the temptation to give up.
Simply ask yourself this question: “Why do I really want to get out of credit card debt?” Write your answer down and refer to it when you need a bit of encouragement.
2. STOP Using Your Card & Taking On More Credit
One of your first steps when trying to clear your credit card debt should be to stop yourself from spending more. From now on, you are banned from taking on any more credit.
If you’re planning to get out of credit card debt, the last thing you want to do is to keep adding to it.
Do not carry your credit cards with you; leave them at home. Remove your card details from all of your online shopping accounts.
Cut them up if it will stop you using them. Why? Research shows people spend 20% more when using cards then if they used cash. Switch to cash and you’ll soon see your mind-set change.
Remember, it’s all too easy to get into debt but the road to financial recovery takes total commitment, time, discipline, and determination.
You have to decide that you want to be debt free and be willing to take the necessary action to achieve your goal. Freeze your cards, lock them up, or run them through a shredder if that’s what it takes. Don’t be afraid to take radical measures!
Don’t ever borrow additional money to pay off debts or bills. Beware of debt consolidation. Debt consolidation simply means that you’ll stay in debt longer.
What’s more, it only deals with the symptoms of debt and not the cause. Trying to get rid of debt by taking on yet more debt is not in your best interest.
3. Identify Your Debts & Prioritise Them
Find out what and who you owe. Gather all your credit card bills together; you can download our Debt Prioritisation worksheet to help prioritise your debts.
Identify and list all your debts, from credit cards to department store cards and everything in between. Prioritise them by writing out a list.
Begin with the card that has the smallest balance. Alternatively, you can list your debts by interest rate, beginning with the highest.
4. Create A Realistic Spending Plan
Do you know how much money you have coming in and how much you are spending? It’s time to take a close look at your day-to-day finances.
Remember to take into account extra sources of income such as child benefits, bonuses, grants, rental income, investment income, payments from the bank of mum and dad, and so on.
The first step toward taking control of your financial situation and getting out of credit card debt is by creating a realistic budget that works for you. If you hate the word “budget,” simply call it a “spending plan.” After all, a budget is just a game plan for your money.
Draw up a monthly budget and find ways to reduce your expenses. You can then put the extra money towards paying off your credit card debt. This usually means cutting down on unnecessary expenses.
To increase your chances of achieving your goal, don’t forget to allocate some “fun” money. If you never get the chance to spend money on things that make you happy, you will become demoralised.
Do not give up when you don’t stick to your budget. Remember, every month will be different. It helps to review your budget monthly and make adjustments where necessary. Click here to download our free budget planner to help you create a budget.
5. Negotiate A Better Rate Of Interest, or Switch To A No-Interest Card
You can make it much easier for yourself to pay off debt by finding out how to save money on your credit card bills. Shop around for a new card that offers a better interest rate. Ideally, find one that will offer you a period of 0% interest on balance transfers.
Contact your credit card companies and request a lower interest rate on the basis that you are a long-standing customer.
Explain that you are shopping for lower interest rates and plan to transfer your balance to another company unless they lower your rate. If you’ve received better offers from other credit card companies, use that as leverage when negotiating with your current creditors.
Some credit card companies will reduce your interest rates if you just call and ask. Everything is negotiable! I once had my interest rate permanently lowered from 14.25% to 5.25%. All I had to do was make a phone call.
If you are experiencing difficulties making payments, discuss this with the credit card company so they can work with you to avoid late payment fees.
They might be willing to waive fees, reduce your interest rates, or accept lower minimum monthly payments. If you are usually on top of your bills and just got behind on this occasion they are more likely to go along with your request.
If you have no success with your current creditor, you can transfer your balance to a credit card company with a lower of interest, or a company offering a 0% introductory rate.
This option is only recommended for those who are disciplined, on top of their finances, and very committed to getting out of credit card debt. Why? Because one late or missed payment, and the 0% introductory rate is gone.
Make sure you know how long the 0% rate will last. Be careful about making new purchases as you will still be charged interest on them.
6. Develop A Plan For Paying Back Your Debts
Make a written plan to pay off your debt by choosing a repayment strategy that suits your lifestyle, personality, and circumstance. There are two main strategies for paying off credit card debt. Consider the merits of each and select a system that works for you.
1. Snowball Method: Pay Off The Smallest Balance First
- In brief, the snowball method involves paying off the smallest balance first whilst making the minimum repayments on all of your other credit cards.
- You make extra payments on the card with the smallest balance each month until it is paid off.
- Once the smallest debt has been cleared, you add the extra money to the next smallest balance.
- Psychologically speaking, the snowball method of debt elimination is by far my favourite method of debt elimination. It gave me a great sense of satisfaction from the outset and the motivation to continue and pay off my debts faster.
2. Avalanche Method: Pay Off The Highest Interest Rate First
- This is where you focus on paying the debt with the highest interest rate whilst making the minimum repayments on all of your other credit cards.
- You make any extra payments on this card each month until it is paid off.
- Once you have cleared this debt, move on to the next most expensive card.
- Mathematically speaking this method saves most money, taking into consideration the interest rate charges on your card.
7. How To Get Out of Credit Card Debt Faster
One question I am often asked: how can I get out of credit card debt fast? The quickest way to pay off your credit card faster is to find extra cash and make additional payments.
The more payments you make, the less interest you have to pay. Here are a few ways to find that extra cash:
- Sell stuff you don’t need, from unworn clothes to your children’s unwanted toys.
- Use your talents and skills such as tutoring, speaking a second language, photography, or childcare to start a part-time or full-time business. You could make and sell unique crafts, offer consultancy services if you are an expert in your field, and explore ways to make money from your hobbies.
- Have a no-spend weekend. Your challenge is to entertain yourself (and family, if applicable) for free. Do a bit of research and find free places and things to do nearby.
- Take on a part-time job or work overtime if that’s an option.
- Eliminate expensive habits and hobbies. Find creative alternatives, develop more economical habits, and put the money you save towards your credit card payments.
8. No Extra Cash? No Problem
Using one of the above debt elimination methods will help you keep the momentum going. Once you have decided how much you can afford to repay each month, keep paying it until all your credit cards are cleared.
Even if you can’t make any extra payments, you can still make progress using these methods. If you clear one card, you can increase the amount that you are paying into your remaining cards until all your debts are gone.
For example, if you start by making minimum monthly payments of £50 into three cards, you can make payments of £100 and £50 after one is cleared, and then one payment of £150 when there is only one card remaining.
9. Put Your Money Where It Is Most Needed
Take stock of your financial situation. Think about your saving and spending habits when you are figuring out how to get out of credit card debt.
It’s much better to put your money towards repaying expensive credit card debts rather than putting it into savings accounts that yield little interest.
It’s also worth remembering that cutting back on some little luxuries could help you clear your credit card debt faster.
10. Celebrate Each Milestone
Whatever method you choose to eliminate your debt, it’s vital to celebrate each milestone – however small. It doesn’t have to be expensive celebration. A day trip to a local attraction or dinner party with a couple of friends will do the trick.
11. Know How To Overcome Potential Challenges
Paying off credit card debt can be overwhelming and stressful. Here are a few tips to help overcome potential challenges and show your debt who’s boss:
1. Unexpected expenses:
Your first priority should be to put an emergency fund in place. This should be about £500 to £1000 set aside for unexpected expenses.
This is one of the best strategies you can put in place when getting out of debt. Remember to top up the fund if you ever use this money!
2. Temptation to take on new debt:
Don’t add more debt or borrow additional money to pay off debts or bills. Read out your “why” aloud daily to get motivated. Redouble your commit to spending less than you earn. Remember, this can help you avoid taking on unnecessary debt.
3. Emotional spending/Impulse buying:
Leave your credit cards at home when you go shopping or when you are feeling low. Remove your cards from all of your online shopping accounts, cut your cards, or freeze them. Do something else that make you happy besides spending.
Help someone, go for a walk, catch up with your besties or watch your favourite TV programme or movie. A good comedy will soon lift your mood. Found something you must buy today? Wait a day or two before buying it. You’ll probably forget about it in a few hours’ time anyway.
4. Spending more than you earn:
Go back to your budget. Allocate some money for fun stuff – the things that makes you feel a million dollars. Try different budgeting methods to see which ones works best for you. Remember, you can live within your means and still have fun!
As a rule of thumb, try to reduce spending on discretionary expenses but don’t totally disregard all those little extras that make you happy. You don’t have to be miserable when learning how to get out of credit card debt.
5. Lack of motivation:
Read your “whys” aloud twice daily to get motivated. Create a vision board, find an accountability partner or someone who will encourage you on your journey.
Read your favourite money blogs and inspiring success stories of regular people who have paid off their debt. Try the snowball method of debt elimination to give you a psychological boost and a quick win.
6. Feeling alone and in need of help:
If you’re still overwhelmed and struggling to pay your debts, don’t be afraid to reach out. Get help if you can’t repay your debts and act quickly if you’re struggling to keep up with repayments.
There are many organisations who will support and help you find the right solution for you – at no cost. You don’t have to learn how to get out of credit card debt by yourself.
Get in touch with one of these charities today:
They are trained to help people just like you start a journey toward financial freedom.
12. Helpful Tools To Help You Break Free From Debt
- Must-Read Books: If I were to pick two personal finance books to read if you want to get out of debt but don’t know where to start, I would highly recommend The Total Money Make Over and Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence. These books gave me great insight, incredibly helpful advice, plenty of straight talk, and lots of motivation to pay off my debt.
- Budgeting Apps: You Need A Budget (YNAB) is my all-time favourite. Other great budgeting apps are Goodbudget and the Money Dashboard.
- Debt Management Apps: Our favourite is the Debt Manager. Simply choose a repayment strategy and the app helps you track and pay off your debts fast.
- A Step-By-Step Guide to Getting Out of Debt: Obvious bias here, but we couldn’t make this list without including our own resources. Download our step-by-step guide to getting out of debt and staying out. The very same system I used in getting out of £32k of debt in 24 months. If you enjoyed this article, you will love this step-by-step guide. This article is basically a 20,000 foot overview of what is taught in depth in the guide and so much more.
Which of these tips will help you get out of credit card debt? Leave your comments below. We would love to hear from you!
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