How to Wipe Out Credit Card Debt

In today's economic climate, becoming debt-free has never been more crucial or more challenging. With interest rates increasing and credit limits being cut, credit cards are becoming an increasing burden for consumers. By having a plan in place for dealing with debt, it is possible to wipe out credit card debt for good.

Instructions

1

Stop spending. Get all your credit cards together, and cut them up. If you don't have an emergency fund in place, you'll want to keep one card just in case a true emergency arises. Otherwise, physically get rid of the cards so you won't be tempted to keep charging up new debt. Use a debit card, or better yet, go to a cash-only system.

2

Gather all of your recent credit card statements, and make a list of how much you owe, whom you owe it to and at what interest rate. Also, make a note of what the current monthly minimum payment is for each account and how much you pay to each account. Rank the accounts from lowest balance to highest or according to interest rate. Although it may seem intimidating, call each of your creditors and request a reduction in your interest rate. If they deny your request, hang up and call back. If they are still unwilling to drop your rate, consider transferring the balance to another card with a lower rate.

3

Create a monthly budget if you do not already have one in place. Make a list of all your other monthly expenses, including mortgage/rent, utilities, transportation expenses, food and other debt payments. You need to know exactly how much you're paying for what and when it's due. Once you know what's going out each month, you need to know how much is coming in. Ideally, you will want to be able to pay your bills in advance according to your pay cycle.

4

Look your budget over to see where you can cut costs. Although some expenses will be fixed, there are bound to be variable expenses that can be cut. Cable, cell phones and Internet are a few examples. Cut out anything that isn't a necessity and that will allow you to free up some extra money in your budget. If you can't cut anything out, then you may need to consider getting a second or even a third job.

5

If you are able to free up some extra cash each month, take a second look at your list of creditors. Ideally, you will want to choose one account to apply all that extra money to each month while paying the minimums on your other debts. When you get that account paid off, you roll the monthly payment over to the next debt on your list and continue to do so until your debts are paid. While mathematically, it makes more sense to pay on the account with the highest interest rate first, some people choose to pay off the account with the lowest balance first to get a motivational boost.

6

Consider selling any assets you have and using that money to pay your debt off faster. You may have some CDs or savings bonds you could cash in or a car you could sell. Take a look around your house for things you no longer use. Hold a garage sale or use websites such as Craigslist and Amazon to sell books or DVDs. If you're serious about getting rid of debt, then letting go of a few things will seem well worth it.