Digging yourself out of credit card debt

img_3378The first step here is to stop adding to your debt. You need to create a budget that can help you pay down the debt and not compound it.

See my tips on budget creation here.

Once you’ve got a new budget in the works, there are a few things you can do to help yourself moving forward.

Interest is the enemy. Your credit card’s monthly interest is eating a huge hole into your debt repayment. Take a look at how much you’re paying interest every month on your bank statement. Wouldn’t it be nice if you were paying that $$ towards the principle instead? As it is, that amount isn’t helping you pay down debt at all, and that really stinks.

My suggestion. Open a zero percentage introductory rate interest credit card. There are several companies that offer them, depending on your needs. You can then transfer the balance you have on your current card to this new one. Sometimes they’ll charge you a nominal fee for this, but if you look at this in the long term, that one time fee will be far less than the interest you’re paying every month now, right?

Typically the introductory zero percent rate will apply for somewhere between 12 and 18 months. Ideally, you’d take your total debt, and divide it by that number to come up with your monthly payment.

If you can’t pay it off that quick, that’s ok too. It’s still helping you to have this grace period to really knock down that debt. When the interest does kick in, your total will be lower, and so will the interest on the card, making the whole thing much more manageable.

The most important thing to keep in mind when you attack your debt this way:

Treat this credit card as a bill. Do not add to your balance once you’ve made your initial transfer.

Why? We’re trying to pay off a debt here. If you keep adding to it, you’re never going to see your progress.

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