Credit card debt can take years to pay off, especially if you are only making the minimum monthly payment. If you can't even make the minimum payment, your credit score will drop significantly, making it difficult for you to get credit for many years. With careful financial planning and an aggressive payment plan, you can get yourself out of debt more quickly and avoid paying thousands of dollars in interest.
Stop Charging
Even if you are making monthly credit card payments, your debt can get even more substantial if you are still using your credit card. Putting more money on your card every month than you are paying off is not a good idea, and neither is using a different card instead. Switch to using cash, checks or a debit card as your payment type for all of your expenses.
Budgeting
To stop using a credit card, you will need to have as much money as you are spending every month. Make a budget that takes into account not only your monthly expenses, such as rent or mortgage, utilities, gas, phone and television bills, insurance, food and credit card payments, but also saving up money for irregular expenses, such as car registration, vacations, Christmas gifts and car repairs. If your budget is not balanced, you need to make more money or spend less money. Categorize expenditures as either essential or non-essential, and consider cutting back to the bare essentials until you are out of credit card debt.
Making Aggressive Payments
Minimum payments on credit cards are set at levels that are far too low. When paying only the minimum monthly payment on a large balance, most of your payment will go toward paying off the interest, and very little of it will actually pay for the items you charged to your credit card.
Looking at an example can help emphasize the significance of this phenomenon. If your credit card has a balance of $10,000 and an interest rate of 15 percent when you stop using it for purchases and start paying it off at just the minimum monthly payment, the federal reserve repayment calculator estimates that it will take 32 years to finish paying it off, and you will pay $15,580 in interest over those years. If, instead, you make regular monthly payments of $350, you will pay off the entire debt in less than threeyears, and less than $2,500 of your payments will go toward interest. Paying off your credit card debt quickly will save you a lot of money in the long run.
Credit Counseling
If you just cannot make a budget that will allow you to stop using your card and make the minimum monthly payments, much less make aggressive credit card payments, it is time to think about seeing a credit counselor. Call your credit card company or bank and ask for contact information of a recommended counselor. Work together to figure out the best options for you to get out of credit card debt. Just make sure to not work with a counselor that is not accredited, as you may get scammed and find yourself in more trouble than before.
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