How to Get Debt Free: 5 Easy Ways to Get Rid of Credit Card Debt



If you are among the average American household, you probably have around $7100 in credit card debt. Credit card debt can be overwhelming because no matter how much you pay, it seems like the debt just never goes down. Credit cards are a revolving type of debt, which means that the interest compounds daily. So when you wake up tomorrow, you will have a higher balance than when you went to bed last night. Credit cards also typically have high rates of interest, with the average credit card rate being around 12%; however, many credit cards have rates well over 20%.

While the Credit Card Accountability Responsibility and Disclosure Act of 2009, or CARD Act, does limit interest rates and fees that companies can charge, it still may not be as easy as you would think to pay off those balances.
There are a few things that you can do, within your current budget to work toward getting debt free:

Pay your bills on time.  Even if you are only a day late, credit card companies will charge you a $25-35 late fee, which will be added on to your bill total.  Remember, anything that goes onto your account, whether a new purchase or a late fee, interest is accruing daily.

Pay more than the minimum payment amount.  If you are just making the minimum payment, many times, you are only paying the interest that accrued that month.  Anything extra that you can pay goes toward the principle balance and will reduce the compounding effects of the interest.

Pay down higher interest rate cards first.  Getting rid of the higher interest rate cards first will free up more of you money each month to pay down other debts.  Keep in mind that store credit cards usually have higher interest rates.  Using a store card to take advantage of a discount or coupon can actually be a great way to save money, but make sure you are paying off those higher rate store cards each month.

Pay off cards with low balances and higher payments first.  If you have a credit card that has a $1000 balance and a $50 per month minimum payment and a card with a $2000 balance and a $50 per month payment, make sure to pay off the one with the $1000 balance first.  In the first scenario, the payment to balance ratio is 5% and the second scenario, the ratio is 2.5%, so getting rid of the smaller balance, with the relatively higher payment will free up more money to put towards paying off another debt.

Limit credit card use.  If you truly want to get out of under the pile of debt that is on your credit cards currently, you need to limit credit card use, or stop using them altogether.  It is much easier to overspend each month if you are using credit cards because you don’t feel the pinch of how much was spent until the credit card statement shows up and it’s time to pay your bill.  Try to use cash as much as possible because you can’t overspend when you only have so much money set aside for groceries, gas, or other household items.

Getting debt free: paying off credit cards

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