The Best Way to Get Out of Credit Card Debt

By: Timothy McFarlin | Published: May 6th, 2010 | Category: Budget & Debts

Perhaps the best way to get out of credit card debt is to never get into credit card debt, but that advice helps few who are reading this article.  For those who are already in debt, the answer may not be as clear as desired.  The best way to get out of credit card debt will depend on a person’s income and the amount of debt they are in.  Those with little or no income but high credit card debt may want to seriously consider bankruptcy as way to relieve some or all of their financial pressure. 

For those who want to lower their credit card debt and are still able to keep their heads above water, consolidating credit card debt from high interest cards to low interest cards is a step in the right direction.  Various financial institutions also offer low interest consolidation programs designed for people who want to pay off their credit card debt without being hit with multiple high interest rates.

Many experts recommend one of the two following methods for debt elimination without filing for bankruptcy and without consolidation:

–Pay off credit cards by amount due:  Make a list of all the credit card debt that is owed and pay off the debt from the lowest to the highest.  For the card with the lowest debt, pay as much over the minimum monthly payment as possible, on all other debts, just pay the minimum.  When the first debt has been paid off, use some or all of the savings from that credit card and apply them to the next lowest debt, paying the minimum monthly payment and as much over the minimum monthly payment as possible. 

–Pay off credit cards by interest rates:  Make a list of all credit card debt that is owed and pay off the debt from the highest interest rate to the lowest.  Use the same method as above, paying only the minimum monthly payment on all cards except the one with the highest interest rate.  For the card with the highest interest rate, make the minimum monthly payment in addition to whatever else can be spared to put toward the card.  Do this until the credit card with the highest interest rate is paid off and apply the principal to the next highest interest rate.

Both methods will work as long as the borrower sticks to their plan.  While it is true that some people may end up paying more with the first method than with the second, the first method offers a psychological comfort from being able to see one’s debt slowly diminish by amount.  Some borrowers have difficulty sticking with the second method because the debt on the card with the highest interest rate may be so high that progress can seem like forever to make. 

No matter what method is chosen, the borrower has to maintain a level of self discipline.  Discontinue the use of as many cards as quickly as possible.  No method of debt elimination will ever work so long as the borrower continues to use the same cards that got them into debt.

Remember what our parents told us about emergencies only?  They couldn’t have been more right. 

Anyone looking for the best way to get out of credit card debt needs to start cutting up cards, making lists, and tackling the debt one card at a time.  Use whatever method works for your situation, just stick with it.

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