How to Pay Off Credit Card Debt Fast

Interest payments on large credit card balances may subtract several thousand dollars away from your bottom line each year. For relief from these expenses, it is critical to coordinate and execute an effective debt management plan. To begin, you will first outline a set of financial goals that add a sense of purpose to your credit card management strategy. From there, you can best free up cash flow and make strategic payments according to interest payments.

Financial Goals

Financial goals lay the foundation for your debt management plan. Common financial goals are related to real estate purchases, college education, and retirement planning. You should list out each goal according to total costs and time frame. Perhaps you will need to save up $150,000 -- in order to send Junior of to the University of North Carolina - Chapel Hill within the next 10 years. Your financial goals, however, will not materialize if you cannot get your credit card under control. You may need to pay down $10,000 worth of credit card debt within the next six months -- before you can begin to save aggressively towards your goals.

Order Credit Report

You will order a copy of your credit report, as part of your debt management plan. The credit report helps you to organize your credit card balances according to size and lender. You may order one free credit report per year through AnnualCreditReport.com. At any time, you can purchase a credit report and score from Experian, Equifax, or TransUnion. Be sure to verify that all information is correct on your credit report. If not, you should file a dispute online with the applicable credit bureau.

Credit Card Debt Refinancing

Your goal with credit card debt refinancing is to negotiate lower interest rates -- in order to pay down your balances at a faster rate. To do so, you will contact each credit card company and request lower interest rates. When pleading your case, you may need to get a manager on the phone, instead of an entry-level company representative. The lender is more likely to lower your rates, if you have a solid credit history and also indicate that you are considering a balance transfer to a competing credit card company. With a balance transfer, you would open up a new credit card account and spend cash proceeds from the new plastic to pay off debt from an old card. You should take advantage of balance transfer offers as a last resort because the inquiries that come alongside additional lines of credit will adversely affect your credit score.

Free Cash Flow

Free cash flow describes the amount of money left over each month after paying bills. You can spend this money to make aggressive credit card payments. To improve free cash flow, it is critical that you undergo changes to your lifestyle and spending habits. You should eliminate discretionary spending from your budget altogether, if you are having trouble paying bills. Discretionary spending purchases consumer goods and services that do not add value to your bottom line, such as fine restaurant dining, concert tickets, and designer jeans. In terms of a major lifestyle change, you should seriously consider a move into a smaller apartment or even taking on a second job to raise cash for paying off credit card debt quickly.

You may also tap banking deposits and investments to secure cash for paying off debt. You can withdraw bank deposits above more than six months worth of your living expenses and cash out of under performing investments for additional cash flow. For example, it makes little economic sense to own a bond that offers a 5 percent return, while your large credit card balances is taxing you at an 18-percent interest rate.

Strategic Payments

Before making credit card payments, you will list out each card in terms of its balance and interest rate. From there, you will make the minimum payment on each card, except for the debt that features the highest interest rate. After your most expensive credit card is paid off, you will then target the debt with the next highest interest rate. When making payments, your goal is to preserve cash to make aggressive payments on your most expensive credit card balance.

More from this contributor:
CD Structure and Laddering
Buying Stocks: Dividend Reinvestment Plans (DRIPs)
Buying Stock Through Employee Stock Option Plans