6 ways to get out of credit card debt

The average household in US owes approximately seventy nine hundred dollars to credit cards, a study held by CardHub in 2015 suggests. Though it is easy to swipe your credit card, it is pretty difficult to get out of the credit card debt. Most people pay the minimum amount due on their credit cards and feel everything is fine, until the debt is surmounted to become unbearable. If are also overwhelmed by your credit card debt, here I will suggest you ways to pay off your debt sooner.

1. Stop Using Your Credit Cards
When I say this, I mean it literally. Avoid taking out your credit card and swiping it everywhere. Most people feel that having a number of credit cards is a mark of financial freedom, but it is not. Credit cards are great financial instruments when used prudently. However, it takes a lot of self control to refrain yourself from swiping your credit card for everything you buy. The interest you pay on credit card purchase is hefty and builds overtime. If you find yourself unable to stop using your credit card, just stow them away, freeze them or simply cut them in pieces. However, if you do not have an emergency saving, make sure that there is one handy in case you need it.

2. Pay the Higher Interest Credit Card First
The credit card with the highest APR is more expensive and therefore it is best to deal with it first to avoid paying large amount of interest. List all your credit card balance with the expensive one at the top. Now start putting more money on this credit card while paying minimum on others. As soon as the debt is paid off, move on to the next card in the list and repeat the process. This method is also called debt avalanche method, where you keep on eliminating debt one by one starting with the most expensive ones. This is one of the quickest ways to get out of debt.

3. Alternatively Use The Debt Snowball Method
While the debt avalanche method is the quickest way to eliminate debt, it becomes a bit difficult to stick to it, owing to psychological factors. Some people feel overwhelmed by the number of debt instead of the amount. The snowball method gives you psychological boost by giving you small wins early. In this method, you have to list all your credit card debt with the smallest one on the top. Now use the similar strategy of putting more money on eliminating the smallest debt and move on to the next. Although, with this method you end up paying more interest rate, but the method keeps you motivated as you get small wins at the early stage.

4. Create a Spending Plan & Stick to It
The surmounting credit card debt is nothing but a symptom of a more chronic problem, namely overspending. Most of the people who are under huge amount of credit card debt are largely because they were not able to control their spending, or worse they are not even aware of their income and expenses. If you are one of those people, I suggest that you create a spending plan. Add your income from all the sources and your expenses, both necessary and unnessary. Once you have a plan in front of you, you can easily assess your situation and free up cash to pay off credit card debt.

5. Utilize Financial Windfalls
Everyone get fortunate once in a while and get some unexpected money. This can be tax refunds, company bonus, gift or any unexpected return. Since this money is not listed in the budget, most people consider it as free money which can be spent on, well, unnecessary things. However, these unexpected monitory rewards are excellent way to reduce your credit card debt. Since the money is unanticipated, it really will have no effect on your monthly budget, but will have huge effect on your credit card interest.

6. Grow Your Saving
A lot of people use credit cards because they have no savings or emergency funds. Every month, make sure that you are withholding a little amount to put in your emergency fund. With proper budgeting, you can free up cash to grow your saving. I suggest you to have an emergency fund that covers at least 6 to 12 months of expenses. However, it is not possible for everyone, especially those who have higher debt and lower income. In such case, you have to either make stringent budget or increase the source of income. Paying your expenses with credit card is not the right option.

Credit card debts can be challenging and can add a lot to your everyday stress level. However, there are ways to get out of your debt cycle quickly. If you will follow the above tips, you can surely eliminate your debts. All you need is a bit of patience and careful planning.


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