Eliminate Credit Debt

Eliminating your credit card debt will save you money in the long run and boost your credit score by lowering your debt utilization ratio. To take action, you must first develop a plan for your finances, then strategize the best way to attack your debt. By getting organized, you are more likely to stick with your plan until your debt is gone.

Budgeting

To eliminate your credit card debt, you need to figure out how much money you can dedicate to paying it off. That means taking a good look at how you're spending your money. For one week, write down all of your out-of-pocket expenditures, then multiply the total by 4.3 to get a general idea of what you're spending each month. Then add in your regular monthly payments for things such as your mortgage, utility bills and car payments. The grand total may surprise you, and you must then look at the broad categories where you're spending the most. Would you be able to save money by using public transportation rather than paying for gas and parking? How much would you save by bringing your lunch instead of eating out? Keeping your ultimate goals in mind when looking for ways to cut back will likely make it seem like a less painful process.

Lower Interest Rates

Your overall debt will take longer to eliminate with high interest rates. Lowering your interest rates may be as easy as making a phone call to your creditors. Prepare by collecting any credit card solicitations you may have received in the mail, so that you know what range of interest rates you should aim for. Call the customer service department and ask for a lower interest rate---if you have been a customer for a long time and you're in good standing, you may use this to support your request. If at first you are denied, try again another day. You may mention that you're considering closing your account and transferring your balance because you've received better offers in the mail.

Debt Snowball Plan

Once you're prepared to begin paying down your debt, you need to choose the method you'll use to do it in an organized way. For those who need the psychological kick of seeing their payments actively impacting their debt, the debt snowball plan may be the best course of action. By paying off the smallest debt first, you will see your higher payments bring down the balance faster than if you applied them to a large debt. For example, if you have a credit card with a $500 balance with a 15 percent interest rate and you pay $125 per month, you'll pay it off within five months; however, on a credit card with the same interest but a balance of $2,000, the same $125 payments will take 18 months to eliminate the balance. The debt snowball plan may help to keep you motivated as you start the process of eliminating your debt.

Highest Interest Plan

Others don't need to see their payments in action if they know that they're saving money by paying off their debt in the most efficient way possible. For these individuals, paying off the debt with the highest interest rate is likely to be a better choice. Debts only accumulate more interest over time, so paying off the debt with the highest interest rate saves money by cutting the amount of time that the balance exists.