How to Eliminate Credit Card Debt

Eliminate credit card debt and live a debt-free life. Living extravagantly and using credit cards excessively can bring on debt and create a huge financial burden. Most people wish to clean up their personal finances and eliminate credit card debt and other types of loans. Unfortunately, not everyone has the extra income to wipe out their debt. But you don't have to live with high debt forever. It is possible to reduce your debt and improve your money situation.

Alter Lifestyle

Keeping up with friends and family often contributes to high debts. When unable to pay for monthly expenses with your present income, it's tempting to use credit cards for everyday purchases such as groceries, dining out and shopping. Altering your lifestyle and cutting back on spending eliminates credit card debt in two ways. You create disposable income, wherein you're able to pay down your credit cards. And secondly, you use plastic less, which results in fewer charges.

This requires self-sacrifice, and you may have to turn down invitations to expensive events or vacations. And if you're unable to keep your head above water, it doesn't hurt to carefully assess your income and expenses and take dramatic action, if necessary. This may involve selling your current home and downsizing or trading-in your present vehicle for one with a lower monthly payment.

Budget Your Money

Eliminating credit card debt involves facing your debt head-on. It's easy to pay your minimum payments each month and never calculate your debts or create a realistic pay off plan. Unfortunately, this method doesn't get rid of debt. Instead, you'll spend the next 20 ways paying off a credit card balance.

Create a household budget and establish a time frame to eliminate credit card debt. It can take several months or years to completely pay off your bills. But with a plan, you'll get rid of debt sooner and achieve your goal. Keep track of your statements and tally your debt totals. Next, subtract household expenses from your income. These expenses include necessary expenditures such as your rent or mortgage, transportation cost, groceries, insurances and utilities. Use your leftover income to pay off a credit card or loan.

Increase Income

Realistically, not everyone has the extra money or cash savings to pay down their credit card debts. And lack of income often plays a role in high debts. In this situation, it helps to brainstorm ways to create additional income. There are numerous ways to increase your monthly income. You can search for new employment opportunities, ask your employer for a raise or overtime, start your own side business or look for second employment. Making an extra $500 a month ($125 a week) can pay down a $6,000 debt in about 12 months.

Consolidation

Debt consolidation doesn't eliminate credit card debt. But with lower interest rates and fixed terms, this method can reduce your debt faster. There are various ways to consolidate debt. If you have good credit and collateral, your bank might consider you for a secured debt consolidation loan.

Homeowners can apply for a home equity loan or mortgage refinance and use cash from their equity to pay off debts, and then pay back their lender at a much lower interest rate. And if unable to utilize either option, debt consolidation agencies are available to assist you. Agencies put a freeze on your credit accounts to prevent additional spending. They help you acquire lower rates on credit cards. And instead of mailing several bill payments a month, you send one payment to the agency, and they send payments to individual creditors.