Is credit card debt causing you sleepless nights, stress, and constant arguments with your partner over money? Are you constantly worrying about how to get out of debt, or feel little hope that you can achieve financial stability?

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.

With so much advice out there, it can be difficult to really know how to get out of debt.

If you are neck deep in credit card debt, follow the seven steps below and you will eventually become debt-free, and can be well on your way to financial freedom.

(if you are looking for a faster way to get out of debt then you may want to consider debt settlement).

Here is how to get out of debt, in a step-by-step format:

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


How to Get Out of Debt: Step-by-Step

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 rest assured that people 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.

Once you know your total balance you can start making a plan, which is essential to getting out of debt.

The uncertainty that comes from not knowing how much a bill is and when it will come will only add to your anxiety and sleepless nights.

Having a clear picture and a plan for moving forward will help you stay calm and relax.

More: The Debt Settlement Guide: Settle Your Debt for Less Than What You Owe

Step 2: Quit Using Your Credit Cards

How to Get Out of Credit Card Debt | Alleviate Financial

When you actively use a card that carries a balance, you are racking up interest charges, and when you’re trying to pay off a card the last thing that you need is to increase the balance. 

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.

Some people freeze their cards in a block of ice so that they can only use them once the ice has thawed out—helping to avoid impulse purchases.

And if none of those options work, get out the scissors. 

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

More: How to Settle Credit Card Debt

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.

Mindless spending—even just eating out for lunch every day, or stopping at the gas station for a soda on your way to work—will slowly chip away at your well-laid financial plans.

Try to look at all expenses in the long term: a $2 Big Gulp at 7-11, every day for a year, is $730!

That’s multiple car payments, or student loan payments, or credit card bills!

And it’s all disappearing because of a tiny little purchase repeated over a long period.

It’s easy to make a budget. We have an entire article discussing how to budget, but here’s a primer.

Set Your Goals:

Setting goals is important as you budget because you need to know what you’re trying to accomplish.

Want to get out of debt? Allocate extra money to that.

Want to save for your kids’ college fund? Do that.

Want to travel more? There’s a place in the budget for that.

Once you know your ultimate goals, you can know how much you need to save and how much you can spend.

Calculate Your Expenses:

When making a budget, you need to know where your money is going, both so you can see where your priorities are and also so you can make wise decisions about where you need to cut.

Add up all your expenses and don’t skimp.

Again, a little expense that recurs every day, be it coffee or fast food or cigarettes, can add up to big money over a year.

As you calculate your expenses, be realistic: you may think that you can live on a certain amount of groceries every week, but you know you’ve been spending more than that for years.

While it’s good to frugal, it’s also good to be honest.

A false budget is a useless budget. 

Calculate Income:

Your income is the amount you bring home after taxes.

It would be wise to even take automatic deductions out of the equation, such as insurance and 401k, and move them to expenses.

This will give you a clear look at exactly how much you’re earning and exactly where your money is going.

You may find that you’re not putting as much into retirement as you should, or that your insurance plans are too high.

Design Your Budget:

Once you have a crystal clear look at expenses and income, you can make the important decisions about where you can spend and where you need to cut.

It is wise at this point to differentiate between fixed expenses and discretionary expenses.

Fixed expenses are things that must be paid: car payment, mortgage/rent, insurance.

Discretionary expenses are things you pay for that you don’t necessarily need: dining out, Netflix, or that new pair of shoes. 

Then when you have your budget, assuming that all goes well, you should find that your income outpaces your expenses.

This is where your goals come in: where does that extra money go?

Saving for a house? Paying down debt? Investments?

Look to the Future: 

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

So what happens if you make your budget and you find that your expenses outpace your income?

Don’t worry—we’ve all been there at some point.

And when you’re trying to pay off credit card debt it’s easy to get overwhelmed with expenses you can’t pay.

So, having made a budget and cutting all discretionary expenses you can, now comes the time to 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.

More: 3 Top Fun Ways to Make Money

More: How to Make an Extra $500 a Month

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. 

Avalanche Method: 

This 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.

Snowball Method: 

This strategy 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.

Blizzard Method: 

This combines both above 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:

This 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

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.

More: What is Debt Settlement? 

Debt consolidation: 

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.

More: Debt Settlement vs. Debt Consolidation: What’s the Difference?


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.


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 on How to Get Out of Debt

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.

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