Debt has a way of creeping up on you, especially if you've developed the habit of using credit cards without considering the possible consequences. If you find yourself facing a mountain of debt and want to get rid of it as quickly as possible, there are some proactive measures you can take. However, you won't be able to continue your previous free-spending ways.
Keep Your Plastic
Although you should try to avoid credit card use if you want to get out of debt, it's usually not a good idea to cancel your cards. Canceling a card lowers your credit utilization rate, which compares the amount of your used credit to your available credit limit. Canceling a card means you've now used up a larger percentage of your available credit, which can ultimately lower your credit score. If you fear you might be tempted to use your cards, consider giving them to someone you trust to hold onto them for you or locking them away in a safe place.
One Debt at a Time
Having a number of different debts can feel overwhelming and even depressing. An effective psychological strategy is to focus on one debt at a time. Start with the debt with the highest interest rate and pay as much toward it each month as possible while paying only the minimum due on the others. When the first debt is paid off, apply that money to the debt with the next highest rate and so on. Retiring each debt creates a positive feeling, which can help you build the momentum you need to get out of debt for good.
Negotiate Rates
Credit card interest rates are not set in stone and you may be able to lower the rate on your cards through negotiation. Call the company and tell it you've received an offer from another card issuer offering a lower rate if you're willing to transfer your balance. Ask your company to meet the lower rate. The worst that can happen is that the company will say no and if you really do have a better offer it may be time to make a switch.
Change Your Habits
You'll never get out and stay out debt for good unless you change the habits that put you there. If you like the convenience of using credit cards, switch to a debit card. Debit cards allow you to make purchases without carrying cash and there's less danger of spending too much as you are limited to the amount of money in your bank account. Also, track your spending for 30 days and look for ways you can cut back by making less expensive substitutions or even eliminating the purchase.
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