As of 2012, the average adult American carries about $4,878.00 in credit card debt (2013 TransUnion analysis). And 39% of Americans carry credit card debt from month to month (2012 NFCC Survey). Credit cards can be a necessity for many consumers, but it can also be a hindrance if not properly managed. For that reason, these consumers are now wondering how to lower their credit card debt.
Here’s how to pay off a credit card:
- Create a budget – In order to pay off a credit card, you first need to see where all your money is going. This is fairly easy to do. Check your bills, statements, and receipts for any given month. How much do you pay for your rent, mortgage, cell phone, cable, internet, utilities, groceries, dining out, haircuts, etc? American Consumer Credit Counseling has a free budgeting worksheet that will make it easier to list all of your income and expenses, and see the big picture of your financial standing. Download it here.
- Analyze and reduce spending – Once you have your budget and can see where all your money is going, you’ll be able to find areas to save money which can be applied to your credit card payments. Maybe you could cancel some magazine subscriptions or premium cable channels and put that money towards your credit card debt. Maybe you’re spending more money at restaurants than you thought. You could be using that money to reduce your credit card debt instead.
- Choose a repayment method – There are two common strategies on how to get out of credit card debt: the Debt Avalanche and the Debt Snowball. See the image below for an explanation of each (click to zoom in). In both cases, you make larger payments to one account until it is paid off, while making minimum payments on others. Once one is paid off, make the larger payments to the next account.
- Contact your creditors – Sometimes your creditors will work with you to help you make paying off your debt easier. They might agree to temporarily reduce your interest rate, or wave some fees that you might have incurred. It’s worth a phone call to ask.
- Seek counseling – If you find yourself unable to reduce your credit card debt after the previous steps, then you may need some help to get out of debt. Research reputable credit counseling agencies, and make a phone call. Good agencies will offer you free budget analysis and credit counseling, then present you with appropriate options to pay off your credit card debt. See the video below to learn about finding a reputable credit counseling agency…