How to Get Out of Credit Card Debt

After working a horrible food service job that didn't pay enough to make ends meet, I found myself buried under a huge pile of credit card debt that I thought I would never be able to pay off. I decided to consolidate my credit card debt and force myself to pay it off in one year. I can't even begin to tell you how amazing it feels to be out from under that credit card debt so I want to share with you how you can work towards freeing yourself from credit card debt and have that same feeling of freedom for yourself.

How Much Credit Card Debt Do You Have?
The first step to getting yourself out of credit card debt is to take inventory of your credit cards. Create an Excel spreadsheet with a column for: name of the credit card, amount you still owe, and your interest rate. Make an extra row at the bottom for the total of the amounts that you still owe.

Request Lower Interest Rate
If you only have one or two credit cards carrying a balance on them and you make your payments regularly you might want to request a lower interest rate from the credit card providers. Over 15% interest is too much to be paying in interest and most of my cards were running at about 22%. If you cannot get your banks to reduce your interest amount by a substantial amount or you have multiple cards that make it difficult to pay each minimum payment you will probably want to consolidate your credit card debt to one credit card.

Consolidating to One Credit Card
I have read some articles that say that consolidating your credit card debt down to one card is a bad idea, but this is a method that I have used myself and successfully got completely out of debt within a matter of months after doing so. Shop around for a good credit card with the lowest interest rate you can find. If you bank with a credit union they should be able to get you a really good interest rate and if you are lucky you might end up getting 6 months to a year without interest meaning that around $20 more of each payment you make will go directly to your debt and not to paying interest. I was able to indicate the exact amount I wanted my card for so I rounded up my total credit card debt to the nearest hundred and transferred all of my card balances to one place. This of course means no more using your credit cards until the balance is paid off. Using cash is a good practice because you can physically see the money leaving your hand which is much more painful than swiping a piece of plastic.

Do NOT get rid of your old credit cards that are now carrying a zero balance. Closing a credit card account is like burning bridges with a former employer. These credit references are like job references, but for your credit report. If you keep these accounts open it will help your credit score more than if you closed them even if you continue to carry a zero balance. Keep your old cards together locked in a safe in case you need one for an emergency situation in the future.

Budget
You should plan on creating a budget for yourself. Make sure you are allocating enough money towards your credit card debt as you can afford to pay even if it means cutting back on some luxury items. Once your card has been paid off you will have a new found appreciation for money and be able to slowly introduce those luxury items back into your lifestyle. Once your debt has been paid off, consider putting part of what you had been paying towards your debt into a high yield savings account such as with ING Direct or Emigrant Direct to help make sure you don't find yourself in another stressful debt situation in the future. A really great free budget spreadsheet is available through free-financial-advice.net and CNN has Budget 101 that is also a helpful budget guide.

Even after you have paid off your debt it is a good idea to stick with your budget. Accounting for where each dollar you spend goes helps keep things in prospective and helps you avoid running out and putting unnecessary items on your credit cards so you don't find yourself buried under a huge pile of credit card debt again.