Reducing Your Credit Card Debt: 3 Easy Steps that Actually Work

So you woke up one day and suddenly became inspired to pay off all of your credit card debt, right? OK, so for most of us the realization comes with the call of debt collectors and money being sucked away by simply paying minimums. Where credit card debt is concerned, the most common response is to simply put it off or ignore the issue all together. That path leads to forgotten payment, late fees, higher interest rates and additional credit card debt to wrangle. Quite the opposite of what anyone needs.

The first step is genuine desire to pay it down, the second step is taking action. Unfortunately, whether you owe $5,000 or $50,000, reducing your credit card debt is a long and tedious process. However, it is not impossible. When you are finally ready to face the demons, you must have a plan.

1. Get a list of ALL of your accounts, their balances and interest rates.

It is amazing to me how many people have no idea how much they really owe. Your $10,000 in credit card debt could actually be $15,000. Either write it down or put it in a spread sheet, but get it stored somewhere. You need to get a complete list of all credit card accounts, their balances and interest rates. From there, add up the totals so you are absolutely sure how much you owe. This can be a frightening first step, but it is a necessary one to tackle your credit card debt.

2. Cut 'em, Don't close 'em!

While this can be a controversial suggestion, I say do NOT close your accounts. Rather, cut up all but one card. That card is to be used for emergencies only. Why not close your accounts? It comes down to something called debt to available credit. If you close accounts that have credit available, your ratio of credit used to credit available goes down and that sends your credit score plummeting. It may seem like you have too many accounts open, but closing them will most likely do more harm than good. So get out those scissors and start cuttin!

3. Develop a payment strategy and stick with it

Paying down credit card debt can be daunting. Most people don't even know where to start. It is an understandably terrifying situation. However, there are some strategies that are tried and true for reducing your credit card debt. Pick one and stick to it, keeping plugging away at it and you WILL see results.

Pay off the cards with the highest interest rates first. This is my favorite approach. Get rid of the highest rates first so that you are not paying so much in interest. Start with the highest rate and work your way down. Once the first card is paid off, apply that payment plus whatever you can spare to the next card and so on.

OR

Pay off the smallest balance cards first. This is more of a mental game, but half of it is psychology. If you want to see a dent and feel progress in reducing that credit card debt, think about paying off your smaller balances first. Though not as "correct" as the first option, it does provide a bit of immediate gratification and a sense of accomplishment. Again, once a card is paid off, apply that payment in addition to what ever you are paying on the next card. That is called snow balling.

If you can start with these items and actually apply them, you will be well on your way to reducing your credit card debt. Keep in mind the old saying, Rome was not built in a day. Paying off credit card debt takes time, patience and perseverance but it can be done.