Getting Your Credit Card Debt Under Control

by Scott Sery on October 24, 2012

Unless you are a lender, nobody really likes debt.  Sure some debt is good debt, like a mortgage on your house.  It helps you get something you most likely would not be able to save up and purchase otherwise.  On the other hand, bad debt is just a drain on your balance sheet.  Perhaps the worst of the bad debt is credit card debt.  This carries the highest interest rates you will see, often borderline usurious.  And considering that the average credit card debt is a little over $7,000 per person, it is time more people sit down and make a plan to get rid of their debt.

Before you go any further, you need to stop putting things on your card.  Absolutely no more charging until the debt is taken care of.  Go to a cash only system if you need to but, make sure the only new charges on the card are interest charges.  Once you have made this resolve make a list of all your debts.  Each row will be listed a different debt, such as MasterCard, Student Loans, Mortgage, etc.  Next to the name of the debt, write down the interest rate you are paying on the debt.  Next to that, mark how much the minimum monthly payments are.  Now arrange your list so that the debt with the highest interest rate is at the top of the list.  You now have a clear picture of what your debts are, and the top of the list should be your priority.

Now is the time to call your credit card company.  Talk with the customer service and tell them that you have a written plan on how to get them paid back.  You will be able to return their money to them faster, and be able to go back to using your card sooner (this is key, they want those swipe fees), if you they are willing to reduce your interest rate.  Initially try to get your rate down to zero, but if you can get it cut in half, that is better than where you are now.  Make sure you have done your research and have a 0% balance transfer credit card ready to go, disclose that you are ready to transfer the balance away from them if they cannot work anything out.

If you do transfer to a new card that offers an introductory rate of 0%, read the fine print.  Many cards will offer this rate for the first year, but after that the rate will skyrocket to close to 30%.  The best way to get out of debt the fastest is to pay off your debt before your introductory rate expires, because often there is a clause that says if you carry any sort of balance even one day past the end of your introductory period, you will owe the interest that would have accumulated during that period.  So before you transfer your balance, be ready to pay off your entire debt.

After transferring your balance, keep the card open, especially if it is the oldest card you have.  The length of your credit is one of the biggest factors in helping increase your credit score.  Another big factor is your debt to credit ratio.  Having a second card open will increase your credit limit, and thus have your score reflect that you are using less of your overall limit.

Now that you have a list of all your debts, and you have transferred the highest rate one into a 0% for a year card; use your Miser for a Month tactics to pay it off as quickly as possible.  You will cut back on everything unnecessary, and knock out that debt.  Do what Joe Mihalic did, and drastically increase your net worth.  Just be aware that while you are paying down your debt quickly, you still need to save for emergencies.

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Scott Sery

Scott Sery is a native to Billings, Montana. Within an hour in nearly any direction he can be found fishing, hunting, backpacking, caving, and rock or ice climbing. With an extensive knowledge of the finance and insurance world, Scott loves to write personal finance articles. When not talking money, he enjoys passing on his knowledge of the back country, or how to live sustainably. You can learn more about Scott on his website Sery Content Development
  • John S @ Frugal Rules

    Great tips. I agree that the first step needs to be stop using the cards. Then determine how bad the damage is and come up with a plan to knock it down.

  • Veronica @ Pelican on Money

    Good thing you point out that credit card companies are willing to work with people to help them make payments to pay down their debts. I know at least one person who has stopped paying their credit card bills entirely, didn’t bother to phone up the company and talk to someone about consolidating the debt and reducing effective interest rate.

    People who work at those places are not all monsters, if we talk, they listen, so why not try and work something out instead of skipping out completely.

  • Writing down all of the details of what you owe can be quite shocking if you haven’t done it for a while, but it is a great first step.

  • It still SHOCKS me the average debt is $7k!! I have taken full advantage of the 0% offers on purchases (all our furniture went on one) but have done some careful calculations! When people start… it can be very difficult to stop

  • moneybulldog

    You used to be able to get Lifetime 0% Balance Transfer offers in the UK but those days are long gone now! I agree, try and pay the the balance off by the end of the 0% period and avoid the temptation to spend what you’ve paid off! The credit card companies offer these deals assuming you will spend more.

  • justin@thefrugalpath

    I was completely unaware that they could go back and charge you for interest you accrued if the balance was not paid off 100%. I’m definitely going to make sure my Citi card is paid off at the end of this year.

  • When I was getting out of credit card debt, I did exactly this. I called each one up and asked for a lower rate. At first, they offered my 0% for six – on new purchases! I told them that doesn’t help me and so I was put on hold while they did some research (most likely played a game of solitaire) and came back with a reduced rate. It usually was about 5% less than my current rate. I don’t know if I could have negotiated more and got it even lower, but I felt as though 5% was a win for me. It definitely helped me to get out of debt faster. I urge anyone trying to get out of credit card debt to call. It only takes a few minutes and can save you a lot of money.

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  • Kim

    We have done a combination of these methods and are almost done with credit card debt forever. That will be a happy day.

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  • MKalime

    I used many of these tactics when I was getting out of credit card debt. It’s not easy :S

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