Say sayonara to credit card debt: 5 tips from personal finance experts
Credit card debt has become one of the great financial hurdles for American's. It's such a problem that March 21st (the day after Spring) was named, Credit Card Reduction Day.
It seems appropriate when you think about it — as the days get longer and the grass shoots turn green, it’s time for you to give new life to your financial affairs. For many, that begins by cutting your credit card debt.
So, how prevalent is credit card debt?
To give you a sense of how easy it is to get snared by credit card debt, consider this statistic: 38.1% of all households have some sort of credit card debt. The mean credit card debt among women was $5,245, and $7,407 among men. Additionally, a 2015 statistic from NerdWallet showed that the average U.S. household carries $15,675 in credit card debt.
Yes, these are real stats. And it's alarming.Say sayonara to credit card debt: 5 tips from personal finance experts Click To Tweet
To help you conquer this debt feat, we asked experts to come up with five of the most useful things you should know.
1. Look at your debt
Jim from Wallet Hacks recommends you sit with your debt for a while. His reasoning: "if you can get past this one thing, you have an extremely high rate of becoming debt free."
Why? Well, once you accept your circumstances you're able to examine how you got there. Be it an onslaught of financial emergencies or simply a knack for swiping without consequence (no, we're not talking about tinder.)
So pour a glass of wine and dive in. Specifically, take some time to calculate exactly how much credit card debt you have, what the APR's on for each of the cards, and which cards have the highest fees associated with them.
This will help you come up with the perfect master plan for cutting that debt down.
2. Put the credit card down and step away from the register
This is a must.
Jeff Rose points out that there's zero chance you're going to ditch debt if you continue using the very thing that got you there in the first place.
Instead opt for a cash or debit only diet. This will ensure you aren't spending money you don't have.
A cash only spending diet requires a bit more commitment on your end, but it's the quickest road to debt freedom. Wondering how that's even possible? Check out this handy guide.
Using your debit card might be happy medium. While credit card interest can sink you into debt quickly, there's something about an overdraft fee that makes even the most frivolous card user stop dead in their tracks.
Plus if you have a Kasasa account, you could actually be offsetting that credit card APR rate with the APY rate you earn on your checking account.
Two birds, one stone!
3. Choose your method and commit
Like all things personal finance (and maybe life,) success comes from 20% knowledge and 80% action.
There's really only two methods you can use to tackle your debt: a debt snowball or a debt avalanche.
Chris from The Money Peach explains how these work, but prefers the debt snowball method. Why? He used this method to pay off over $52K in 7 months!
The debt snowball method works wonders because it primes your behavior. The feeling you get after you pay off your first credit card will only motivate you more to tackle the next balance.
Before you know it, you can see almost taste the financial freedom!This two-pronged approach to ditching debt is the HOV lane of credit card debt payoff strategies. Click To Tweet
4. Negotiate your interest rates down
Tracie from Penny Pinchin' Mom shares one, often overlooked tactic, for ridding yourself of debt: picking up the phone and calling your credit card company.
Yes, this actually works. And it can make a world of difference.
Just imagine you have a balance of $7,000 on your credit card, and you're currently paying an APR of 15%. If you were to only make minimum payments (usually 1%-3% of your outstanding debt,) it would take you about 6 years to clear that debt, and by the end you would have paid over $4,000 of interest.
- Minimum credit card payments are not your friend.
- Compound interest is either your best friend or your worst enemy.
Now, let's assume you take our advice and you negotiate your credit debt down. If you were to get your APR down to 8% (realistic,) you'd be looking at total interest payments of a little over $1,500. Just from a polite call, and some persistence.
Our friends at Learnvest have a great guide to utilizing this tactic, including a word-for-word script.
5.Cut expenses and boost that bottom line
When you commit to ridding yourself of debt, you have to go all in. That truly means evaluating your wants vs. your needs. There are many things we tell ourselves we need - the premium cable package (or cable at all,) that gym membership, the big cell phone data plan. How about that weekly or bi-weekly trip to Chipotle at lunch?
All of these add up in big ways over time. And all of these behaviors are preventing you from reaching your goal.
So dial them back one by one.
Erin, from How to Nest for Less breaks down all the expenses she cut back on to pay down $20,000 of CC debt. Just remember, it's not forever, just until you reach financial freedom.
Simultaneously, you can be boosting your bottom line with a side hustle. This two-pronged approach to ditching debt is the HOV lane of debt payoff strategies.
Side hustles come in many different forms - from selling all your crap, like Man vs. Debt did, to monetizing a passion of yours, to one of these out-of-the-box income boosters, you'll be building your momentum in no time.
Additional resources: If you're still craving more information on responsibly handling your credit card debt, or tips on how to increase your financial literacy, check out The National Foundation for Credit Counseling or the U.S. Government’s page on dealing with debt.