Is credit card debt causing you sleepless nights, stress, and constant arguments with your partner over money?

If yes, it’s time to take action.

Credit card debt is the worst type of debt.

The average APR (annual percentage rate of charge) on a credit card is 15%.

But it can go as high as 29.99% if you have bad credit.

With such high-interest rates, it can take you years to pay off even a small balance on your card.

In addition, credit card debt generates no return.

Unlike student or mortgage loans where an education or a house may pay dividends later.

If you are neck deep in credit card debt, follow the seven steps below and you will eventually become debt-free. (if you are looking for a faster way to get out of debt then you may want to consider debt relief).

Step 1: Find out how much you owe

Step 2: Quit Using your Credit Cards

Step 3: Make a Budget

Step 4: Make More Money

Step 5: Pick a Payment Strategy

Step 6: Get Help

Step 7: Change your Financial Habits

Bonus tips

Step 1: Find Out How Much You Owe

Chances are you may have your head in the sand blindly paying off bills with no strategy.

We do this because denial protects us from the guilt and fear that comes with debt.

But avoidance only makes things worse.

And your creditors are counting on you to avoid your growing debt so you spend more.

Knowing how much you owe is the first step to crushing debt.

The number may be large but I assure you people who have paid off the same or a higher amount.

Take out all your credit cards, call the number at the back (customer service) and ask for your total balance, the APR on each card, and the monthly minimum payments.

Step 2: Quit Using Your credit cards

When you actively use a card that carries a balance, you are racking up interest charges.

The greatest benefit of a credit card is the grace period.

This is the time (usually 21 days) you have to pay your balance in full without interest charges.

If you can’t pay your bill in full within the grace period–which is usually the case–the balance is carried over to the next billing cycle.

And you lose the benefit of the grace period.

As a result, any new charge you make to the card is immediately subject to interest.

So the $50 pizza you just charged to a card with a $1500 balance is already collecting interest before you put a slice in your mouth.

You can end up paying double what you charge to your credit card on interest fees.

That’s why you should quit using your credit card while you try to pay off the balance.

It’s hard to stop, however. So don’t simply make an internal resolve.

Lock your credit cards away in a safe, or give them to someone you trust to hold for the time being.

Rearrange your finances so you spend cash more or get a debit card.

Step 3: Make a Budget

The secret to staying out of debt is spending on a budget.

A budget is the most basic and effective tool to manage money.

Having no budget or a poor budget is the reason you can’t account for most of your money.

It’s easy to make a budget as well, here’s how:

Record your income: Your income is the amount you bring home after taxes and healthcare. It includes your wages, investments, alimony, and other money-generating sources.
Remove your Savings: Keep 15 to 20% of your income for emergencies. An emergency fund prevents you from turning to credit cards when an unexpected need arises. Also, put as much as you can in your 401K especially if your employer matches your contribution.
Categorize your expenses: Separate your expenses into three categories- fixed, flexible and discretionary expenses. Fixed expenses include things like rent, mortgage, insurance, and minimum debt payments. They are fixed because they remain the same each month. Flexible expenses are necessities such as groceries, utilities that you can adjust. Discretionary expenses are non-essential items like fine dining and Netflix.
Draft your budget: Assign an amount to each item on your list of fixed and flexible expenses. Then use whatever is left for your discretionary expenses. Your expenses should not surpass your income. If it does, make adjustments to your expenses.
Review your budget: Come back at the end of the month to compare your actual expenses with your budget. This is the only way to know if you are sticking to the budget–which is the hard part.

Step 4: Make More Money

With more money, you can pay above the minimum amount which reduces your interests and pays off your balance sooner. Here are five ways you can free up some cash:

Trim expenses: Cut your discretionary expenses to the bone. Cook more instead of dining out. Spend more time indoors. And find cheaper alternatives to expensive brands.
Get a second job: You will probably spend long hours working so it’s important you choose a job you’re good at and enjoy.
Start a side hustle: Many companies now outsource their copywriting, bookkeeping, editing, design, other needs to freelancers. If you have any of these skills, you can start a small side hustle and make amount each month.
Work overtime: Take paid overtime if it’s available at your job. But make sure you can handle the workload. Don’t put your health and job at risk by taking on too many responsibilities.
Sell your belongings: It might be time to downgrade your house or car. Or sell small items around your home for extra cash.

Step 5: Pick a Payment Strategy

There are three popular ways to pay off credit card debt; the avalanche method, the snowball method, and the blizzard method.

The avalanche method is an aggressive strategy where you pay off the card with the highest interest rate first.

You still pay the minimum on all your cards, but you put any extra cash on the card with the highest APR.

When the balance on that card is paid in full, you roll the money you were paying on it to the next card with the highest interest rate.

The avalanche method saves you the most money but is the least successful. Why?

The card with the highest APR usually carries the largest balance. It may take years to fully pay that debt.

And the slow progress eventually demoralizes you.

The snowball method focuses more on the card balance than its APR.

In this method, you pay off the card with the lowest balance first.

When the debt is paid in full, you roll the money you were paying on that card to the next card with the smallest balance.

Several experts such as Dave Ramsey recommend the snowball method. I agree. Having an early win is a major confidence boost. You are more likely to stick to your plan when you see it working fast.

The blizzard method combines both strategies.

You start by paying off the card with the smallest balance to gain momentum.

When that debt is paid in full, you move on to the card with the highest interest rate.

The blizzard method appeals to both emotion and logic.

You gain confidence by conquering debt early and still save money on interest rates in the long run.

Step 6: Seek Help

Sometimes your debt is too large or the interest rates are too high.

And you can’t possibly pay it in full by yourself.

If that’s your situation, it may be time to seek help.

You have many options such as credit counseling, debt settlement, and debt consolidation

Credit counseling is a great way to learn how to budget and manage your finances.

You work with a credit counselor who gives you expert financial advice and can also negotiate with your creditors for a lower monthly payment or reduced interest.

Debt settlement is a legal means of reducing your debt by 40% or more.

Creditors agree to a settlement when they realize you can’t pay in full and they risk losing money.

You can negotiate a settlement by yourself or with the help of a settlement company.

Debt consolidation merges all your existing loans into a new and better form.

Here‘s how it works.

You take a consolidation loan from a bank or lending agency to pay off your existing debts.

This leaves you with a single payment each month at a lower interest rate.

Do your homework before choosing a credit counselor, debt settlement company, or lending agency.

Find out their fees, licenses, and qualifications.

You can reach out to your local consumer protection agency or state Attorney General for information on the company.

Step 7: Change Your Financial Habits

Whether your goal is to become debt-free or save more, you need good financial habits to succeed.

Here are what I consider the most important financial habits to stay out of debt

Live within your means: If you have to borrow, you can’t afford it. Living on credit is the number one reason people go into debt. You want out? Spend less or increase your income.
Track your spending: The best way to do this is with a budget.
Save: Treat your savings as a monthly bill. You don’t have a choice but to pay.
Organize your finances: Automate your bill payment. You can automate your savings as well. Review your budget, bank statements, and credit card statements on a regular basis.
Buy Assets: Invest your money in income-generating assets like stocks, bonds, real estate, and business opportunities. Your car and personal properties are not assets. Because they almost always decrease in value and take money out of your pocket. Spend less on those.

Bonus Tips

Besides the steps listed above, here are a few more things you can do to stay out of debt.

Tip 1 – Join a debt support group: A group is a great place to get emotional support during tough times.

You can also seek financial advice from people in the group who are now debt-free.

Tip 2 – Educate yourself: Financial education is the best investment of your time and money. Grow your financial literacy by reading books, listening to podcasts, and attending seminars.

Tip 3 – Find your why(s): Your reason(s) for becoming debt-free is a great source of motivation.

Do you want to travel? Give generously to causes that matter to you? Or Leave tangible assets behind for your family?

These can be your whys for getting and staying out of debt.

You can do it

With patience and persistence, you too can eliminate credit card debt.

Bookmark this article and come back to it whenever you need the encouragement.

Now take action and don’t stop until you are debt-free.

Are there any tips you’ve used to reduce debt? Tell us below.


Schedule a free consultation today for a risk-free debt assessment. The only thing you have to lose is your debt.