Regardless of which survey you read, most indicate that the average U.S household struggling with credit card debt is carrying a revolving credit card balance of over $6,800 (nerdwallet 2018). This translates to over $434 billion in consumer debt in the United States.
The financial costs of credit card debt are obvious. Paying more money in interest. Not being able to save money. Foregoing retirement planning to keep up with monthly credit card payments. However, the emotional cost of credit card debt is often overlooked. Higher levels of stress, frustration, anger, regret, all add up to a level of personal dissatisfaction that can overflow into every aspect of your life.
If you’re struggling with credit card debt, and want to get out of debt. Here are four tips to pay off credit card debt fast, so you can position yourself for success. And remove the financial and emotional baggage that comes with carrying all that debt.
#1 Understand What You Have for Credit Card Debt
This seems pretty obvious, but the average number of credit cards per individual in the U.S. is two. About 30% of credit card holders have 3-4, and another 15% have 5-6 credit cards.
The more credit cards you have the less likely it is you understand what your current balance is, your monthly payments and the interest you’re paying. At least until the next monthly statement comes. Understanding your credit card debt, how much it is and what your minimum payments are is a first step to getting out of debt. Once you fully understand your situation you can create a plan to get out of debt.
This first step is the most important step to paying off credit card debt fast. Unfortunately, it can also be the hardest. Why?
Because surrounding ourselves with all those monthly credit card statements, to figure out just how bad our situation is doesn’t feel very good. It sheds light on the fact that all those past purchases we made have created a real problem with our finances.
The good news is, that once you understand the “big picture”, regardless of what that picture looks like. You can take action to resolve the problem. To work your way out of debt. Remember that the past is the past, and the future of your finances is what you make of it today.
#2 Establish a Plan for Paying Off Credit Card Debt Fast
Unfortunately, when trying to get out of debt some will fall back on “hope”. Hoping that somewhere in the future their circumstances will change and they will be able to pay off their debt. Regrettably, this rarely happens. From an FTP perspective, and in relation to credit card debt – “hope” is a four-letter word.
If you were going to drive from New York to Denver, the quickest way to get there would be to plan the best route. You would consider the roads you would travel, the towns you were going through and the places you might stay in. You would have a plan, a roadmap.
Getting out of credit card debt, and doing it fast is no different.
There is no shortage of opinions on how to pay off debt. I personally am a huge fan of the Snowball Method (from experience), specifically when it comes to credit card debt. The Snowball Method takes a practical and systematic approach to pay off debt. It’s easy to understand and provides a huge emotional lift as you’re trying to dig your way out of the proverbial debt hole.
In fact, a Harvard study found that concentrating your efforts on paying off a single credit card balance versus dispersing payments across multiple credit cards led to a higher success rate of paying off debt. You can read the complete article here.
In addition to paying off credit card debt fast, the Snowball Method is a great way to start organizing all your debt (Tip #1) so you have a clear picture of what you need to pay off.
If you’re not familiar with the Snowball Method, watch my short video, It’s About Focus: How to Pay Off Credit Card Debt Using the Snowball Method.
Also, consider using a free monitoring service like Credit Karma to monitor and track your progress as you pay off your debt.
- Why the Snowball Method Works
- 3 Reasons Why You Need an Emergency Fund & How Much Cash to Stash
- What’s Not Important When Paying Off Debt! Don’t Put the Cart Before the Horse
#3 Create a Budget
If hope is the four-letter word when trying to pay off debt. Budget or Budgeting is the four-letter word of personal finance – with the exception that it doesn’t have four letters.
Budgets feel restrictive. They have the perception that creating one is going to force you to give something, everything up. However, I don’t know anyone that successfully manages their money without understanding their budget. Where their money goes and what they have to work with.
In respect to paying off credit card debt, creating a budget and understanding where your money is going will provide you with insight on how you can reduce your monthly expenses. And then you can use those extra savings to pay off your credit card debt fast.
- How to Create a Simple Budget
- Cutting Cable, Saving Money and Getting Comfortable with Feeling Uncomfortable
- The Art of Being a Cheapskate – How I Successfully Manage My Budget
#4 Get Rid of All Credit Cards Except One
Similar to taking control of your credit card debt by understanding what credit card debt you have (Tip #1), having one credit card to manage in the future will keep you from creating the same environment your already in.
My recommendation for individuals struggling with credit card debt is to remove any opportunities to use credit in the future. Eliminating all your credit cards except for one will remove the temptation to “charge it” and accumulate more debt.
There is a huge misconception in our society that credit cards provide us with some magical benefit. A better credit score, more purchasing power, a higher social status. The more the better. Although there are some benefits to having more than one credit card, they are significantly outweighed by the fact that interest charges on unpaid credit card balances average @18% a year.
Would you knowingly purchase an item for 18% more than the regular price? Probably not! But that’s what happens when you purchase items with credit cards and allow the balance to carry over from month to month.
If having only one credit card makes you feel a bit uncomfortable. Be sure to read How Many Credit Cards Should You Have? My Credit Score with One Credit Card. This article will change your perspective on the number of credit cards you really need.
- How to Improve Your Finances by Bucking Herd Mentality
- Should You Use a 0% Balance Transfer Offer to Pay Off Debt?
- How to Stop Using Credit Cards – Telling Yourself Little White Lies
As you travel down the road and start paying off your credit card debt, keep these key points in perspective.
- Debt is not a lifetime sentence. Others have had credit card debt and worked their way out to achieve financial freedom, you will too.
- Set your expectations appropriately. You can’t spend years ringing up credit card debt and expect to pay it off overnight. The wrong expectations can be a real de-motivator as you travel down the debt-free road. The key to success is to stay focused, stay consistent in your efforts and stay the course. It may take some time, but you will achieve success.
- Keep reminding yourself that the real reason you’re working so hard to pay off your credit card debt isn’t just because of all the money you’re going to save. Rather it’s the other lifestyle opportunities you will create for yourself – career, family, where you live and how you live.
- Credit Karma – Free Credit Score, Monitoring & Insights
- Filling The Pig – Workbook, Worksheets for using the Snowball Method and creating a simple budget. Free to download.
- Your Money or Your Life, Vicki Robbin Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence
Do you have a tip for paying off credit card debt fast? Comment below.