Explore How to Get Out of Credit Card Debt Step by Step
Last Updated: November 30, 2022
One of the worst things about credit cards is credit card debt. It is expensive, and it can take years to claw your way out of it. Meanwhile, your credit suffers, affecting your ability to finance a car or rent an apartment. In some cases, your credit affects whether you get the job you want. Fortunately, we can help you find out how to get out of credit card debt.
Build Your Credit Card Payoff Plan
Nothing is possible without a detailed plan. That’s why the first step to your debt-free status is building a workable payoff plan to reach your goal. These Credit Card Payoff and Credit Card Payment calculators can help you do this more easily. You can find out how long it will take you to escape from your debt, how to reduce this time, and how much your monthly payments should be to get out of your debt within a specific period. The most important thing to do is to set a specific date when you pay off your credit card debt completely.
Prioritize Your Credit Card Debt Payments
List all your credit card APRs from highest to lowest. Although there are two methods of paying off debt – debt avalanche and debt snowball, we recommend that you pay off your credit card with the highest APR first. This will allow you to get out of credit card debt faster.
Pay at Least Minimum Amount on Each Debt
You should be paying at least the minimum amount on the credit card loan every month. It keeps your credit rating in good standing. The card company will report your account as delinquent if you don’t pay after 30 days. Not paying this minimum means your card company can issue a late fee or a penalty annual percentage rate (APR). Yet, minimum payments are usually so small that it just about covers the interest on your balance. If you can afford to pay a little more, that’s even better. Put that extra money towards the card with the highest interest rate first. When that debt is cleared, put your extra money towards the next highest rate.
To calculate your minimum payment, a credit card company will use the following formula. For a statement balance of $11,000 and a flat fee of 2% (0.02)
Minimum Balance Payment = Statement Balance x Flat Fee = $11,000 x 0.02 = $220
Or… you can use this handy Credit Card Minimum Payment Calculator. It can calculate the minimum monthly payment, and the number of months to pay off your debt. You’ll see you how much you are paying in interest, and how much this debt will really cost you. It even shows how every payment is broken up into interest and principal; and what your balance will be.
Get Out of Credit Card Debt by Asking for a Lower Interest Rate
Ask and you shall receive! Request a lower interest rate from your credit card company. Should that person say they can’t lower your interest rate, ask to speak to their supervisor. If your payment history on your credit card is good, you can use this as leverage in your request. The worst they can say is no; but if you are successful, you will save you money on interest. This will help you get out of credit card debt.
Consider a Consolidation Loan
You may be able to group all your debt together into a low-interest loan, effectively reducing your interest rate. The two most common options are a home-equity loan and a home equity line of credit. If you are eligible, you must stop accumulating debt while paying off the new loan. These loans may be dangerous, especially if you turn to loan shark lenders. Make sure you’re going to work with a reliable lender and the APR on your new loan is lower than the one you have. Otherwise, you can go even deeper into debt and even lose your home.
Trim Your Budget to Get Out of Credit Card Debt
Take a look at what got you into trouble in the first place: your spending. Where is your money going? Can you reduce your spending in one or more ways? The money you save by reducing your spending can be used to pay off more debt.
Talk to a Professional
When all else fails, talk to a certified financial planner or credit counselor. Make sure these are not-for-profit organizations that offer help with financial planning.
Most people think that a financial professional is expensive. This is false. A number of non-profit agencies provide access to financial professionals who may be low cost or free. Work with one to figure out a reasonable plan that will help you get out of credit card debt over time. Your financial advisor must be able to explain the complexities of your financial situation so that you can understand it. If your financial professional doesn’t do this, get a new one.
In a case where your debt seems impossible to pay off completely, you may consider bankruptcy as an option. However, bankruptcy has serious, long-term consequences. Consult your financial professional to see if it is the best option for you.
Now you know how to get out of credit card debt. With a little work, some time, and patience, you’ll soon be debt-free.
My personal plan how to reduce credit card debt – I still have a full time job and paycheck, so I put my entire stimulus check and my tax refunds on my credit card debt. I also picked up hours teaching summer school via Zoom and have been putting that toward it too. At this rate, I may have my credit card paid off by the end of the year! Then I can focus on student loans!
Congratulations on having the plan to pay off your credit card debt. Once this is done you will have way more cash flow to both pay down the student debt and save some money. Credit card debt is the priority though!
I did a balance transfer of my credit card debt to a card with 0% interest for 18 months. There was a fee for $100 but I was being charged more than that in interest every month
Yes, the 0% balance transfers are not really free but make sense at times. We actually have a video about it https://www.youtube.com/watch?v=ysTf6XSIHJw
My advice is to use a website like undebt.it to see how long it will take you to get out of credit card debt if you can add extra cash to one card. Right now, focus on one card, minimums on the rest. Then figure out how to make it happen. I did a few 0% balance transfer offers to make more progress. Even if you have to pay a 3% transfer fee, it’s less than what you’ll pay in interest in a few months.
Yes if you are eligible for balance transfer offers you can speed up your debt repayment. As long as you are aware of all of the caveats
I think it helps a little to track your payoff date to see a little light at the end of the tunnel and to celebrate every small success on the path. That said I am finding that I have to figure out no cost or low cost things to focus on so that I don’t obsess over the debt since it’s going to be a LONG journey. I’m trying to focus on decluttering, using up what I have in creative ways, getting healthier, and getting better at cooking.
That works as well. The minimalism brings clarity and simplicity that reduces stress
Feeling really discouraged these days. I find myself living paycheck to paycheck with almost all of my money going to student loan and credit card payments. I can’t seem to get out of my financial hell hole. Any advice?
Maybe switch jobs? I know I was struggling in 2019 cause my first full time gig paid me $10 an hour and it sucked then I quit and found another positioned that paid more and had the opportunity to make commission on my sales and I used that to make larger student loan payments while keeping my regular paycheck to bills and savings
I would suggest paying the minimum necessary on student loans and putting that money towards credit cards. If your taxable income is lower than it was when you started making these payments you might qualify for lower payments based on income related payments.
I constantly calculate my student loan balance. But more importantly calculate to get an amount youre comfortable with paying. That amount must be higher than the monthly payment, but it doesnt have to break the bank… when you make those payments youll get ahead. They should give you the option to move your payment date ahead. Definitely do that.If there comes a time where you cant make the larger payment it wont be a problem because youre going to be ahead. That creates a little breathing room.
But just be consistent and you’ll get through it
You need to build a plan on how to get out of Credit Card debt first, see if you can defer the student loan payments and then work on saving a bit. Once you have the plan in place it will give you clarity and some calmness. Obviously working on your income potential will help as well.
Sometimes it is best to start with the credit card with the highest interest rate. Why pay them interest? That interest is YOUR hard earned money!
It makes the most mathematical sense. Sometimes people’s behaviors are not rational and they like to see a “win” by completely reducing one of the debts. At the end of the day it is whatever works for you, as long as you are improving.
What I did I got a credit card with a 0% balance transfer and used it for the highest interest card. That saved me hundreds of dollars but it will really only work if you can get the balance paid within the 0% interest time frame.
Just make sure you cut up the cards after the balances are paid off. Dont close them all out at once. It will hurt your credit. I kept one credit card and it will be for absolute emergencies but ill have a savings built up for emergencies. Never can be too careful though
This can be done as long as you account for all of the balance transfer fees and don’t use the new card to rack up new debt.
I had accumulated credit card debt, so my husband and I got a low interest signature loan and paid them all off. I locked the cards up and we went cash only. I had to stop mindlessly shopping out of boredom or fake needs.
This is a serious move, I am glad you took it and hopefully with time you won’t need to stick with cash only as this discipline will become a habit.
What helped me was paying credit cards more than just once a month. Making random extra payments repeatedly each month not only chipped away at balance, but was a psychological boost!
That’s great that you found what works for you and yes if we carry a credit card balance increasing payment frequency reduces overall interest.
My spouse and and I had a panic moment just before the pandemic. We moved to a new city at the end of July 2019. He stayed behind until September to finish “flipping” our old house and getting it ready to go on the market. The house took WAY longer to sell than we expected, and the buyer having a picky lender meant lots of unexpected costs to get the house up to their standards. We ended up only breaking even on the sale too, so no extra profit to put toward our new house and it’s expenses. So we… Read more »
It does take hard work and consistent commitment. Congratulations to you and your husband for sticking through it. Hard times don’t last, hard people, do!
I use this spreadsheet to look at exactly what I owe and how much I can pay towards the debt to get it paid down. It’s really easy to use, you just put your numbers in. And instead of looking at this giant number, it’s broken down.
The biggest journey starts from one step!