Five Steps for Eliminating Credit Card Debt

With its “sign-now-pay-later” premise, credit cards are one of the most common ways to get into debt. Most of those who own credit cards have balances on them, accruing high interest fees that create never-ending debt. If you are struggling with this problem, follow these five steps to help you get out and stay out of credit card debt.


Step 1: Write it down

The first step to solving any problem is to get a handle on it. With credit card debt, you want to list down all the cards you own, the balances on each of them, the interest rate for each card, the minimum payment, monthly payment and due date. The good old pen-and-paper method will suffice, or if you prefer, fire up your spreadsheet programme.


Step 2: Eliminate the smallest balance first

Commit to clearing your credit card debts, starting from the smallest amount. It may be tempting to start paying off the balance with the highest interest rate first, but starting with the smallest debt will help you build momentum and instil discipline. The achievement of clearing your first debt will give you an important psychological boost, providing the motivation to keep going.


Step 3: Consolidate to 0% cards

Keep an eye out for any card promotions that offer 0% transfer fees and annual charges. If you find one, consider consolidating your remaining balances so you can avoid annual fees. Ignore cards with transfer fees – they can add up to wipe out the benefits of having 0% annual fees.


Step 4: Know your financial habits

Often, credit card debt creeps up on us because we have low awareness of our spending habits and cash flow. Learn to separate your fixed and discretionary expenses so you can have a better sense of how much money you are spending, and on what. Consider switching to a debit card – these cards offer many of the same abilities (for online shopping, etc.) but can only be used up to your account balance. This will help you prevent overspending.


Step 5: Start an emergency fund

The main reason we start accruing credit card debt is that we do not save. Starting an emergency fund will create a buffer that you can dip into when necessary, without saddling you with expensive fees later on. So commit to putting aside a fixed amount each month – no matter how small – starting today!