If you are in credit card debt, you are not alone. Let’s look at some statistics on the current state of credit card debt in America.
$986,000,000,000 – Yes, $986 billion dollars is the total amount of credit card debt held by Americans as of Q1 2023.
$7,279 – The national average card debt among cardholders with unpaid balances in December 2022.
56% of cardholders carried a balance at some point.
44% used their credit card but did not carry a balance.
20.09% is the average annual percentage rate (APR) among all credit cards.
There is good news! There are many ways to eliminate credit card debt and stay out of credit card debt. In this blog post, we will explore five valuable tips that will help you eliminate credit card debt and regain control of your finances.
1. Know your balance(s) and interest rate(s)
The first step in tackling credit card debt is to clearly understand your outstanding balances and the interest rates associated with each card. Take the time to review your credit report and make a note of the balances and interest rates for all your credit cards. This knowledge will empower you to prioritize your debts and develop an effective debt repayment strategy. Answer these questions when reviewing. How many credit cards do I have? How many credit cards have an outstanding balance? Which cards am I paying interest on? When do interest rates kick in on the credit cards you are paying 0% interest on? Once you know this, you will be ready to take the next steps in reducing your credit card debt.
2. Look at your budget (expenses)
Creating a comprehensive budget is crucial for managing your finances effectively. Examine your monthly expenses and identify areas where you can reduce or eliminate unnecessary spending. By doing so, you can free up additional funds that can be allocated toward debt repayment. Consider cutting back on non-essential expenses, such as dining out or entertainment, and redirect those funds towards paying off your credit card debt. Fixed expenses can be hard to reduce. Items like rent/mortgage payments, insurance, and utilities. Some fixed expenses, like subscriptions that fall into a want category versus a need, can be cut—expenses like Netflix, Amazon Prime, and HBO. Variable expenses that are hard to reduce are needs like groceries and gas. Other variable expenses that are easier to reduce are going out to eat and entertainment.
3. Develop a plan
To eliminate credit card debt successfully, you need a well-defined plan. Set a specific debt elimination date and break down your total debt into manageable monthly payments. Start by paying off the credit card with the highest interest rate first while making minimum payments on the other cards. Once the first card is paid off, redirect the funds towards the next highest interest rate card. This approach, known as the “debt avalanche” method, minimizes the interest you pay over time and accelerates your debt repayment progress.
4. Consider helpful options
Sometimes, exploring alternative options can benefit your debt-elimination journey. One option is to transfer your credit card balances to a card with a 0% introductory APR. This strategy can temporarily relieve high-interest rates, allowing you to make significant progress on paying down your debt. A credit card transfer can cost 3-5% of your outstanding balance, which is better than paying over 20% APR. Consider consolidating your credit card debt into a personal loan with a lower interest rate. Be sure to carefully assess the terms and conditions of these options and compare them to your current situation to determine the most suitable choice for your needs. Your local bank can help you with a personal loan and formalizing a plan. If you have a budget, a good credit score, and a stable income, they can help you with a loan that will make your monthly payments manageable and ultimately head to eliminating your credit card debt.
5. Stick to your plan!
Once you have developed your debt repayment plan, it is crucial to stay committed and disciplined. Set reminders for making payments and monitor your progress regularly. Celebrate small victories along the way to stay motivated. Remember that financial situations can change, so be prepared to adjust your plan if necessary. The key is to remain focused and persistent, even when faced with unexpected challenges.
Look for the money you have you forgot about! Oftentimes, people have money tucked away in places they may have forgotten about. You may have an older savings account with money in it. Your emergency fund of 3-6 months’ savings might have an extra balance that you can use to pay off your credit card debt immediately. Maybe you can get an unexpected raise or bonus from your job, and you can take all of that money and make an advanced payment on your credit card debt.
Talk to someone! Financial problems are often a silent stress. You may get the feeling of failure or disappointment, among other things. There is pressure to overcome money problems by yourself, and sometimes that is possible, but talking about it with someone is helpful. Like mental and physical health are now talked about productively, financial health needs to be the same. Find someone you know and trust, a close friend or family member, or consider a financial coach or counselor to discuss with. Better financial health will improve physical, mental, emotional, and social health!
Cut up your cards and deactivate them! We have all heard of cutting up your credit card. It is a physical act that ensures you never swipe them again. Are you prone to rack up credit card debt often? Deactivate any cards with $0 balances to avoid the temptation. Another tip is to switch any auto-pay with a credit card to a debit card or bank account and remove your credit card account from any apps or websites like Amazon.
How can My Financial Snapshot help?
Writing out a plan! Use our financial planners to gather your thoughts and formalize a plan. FREE planners here!
Budgeting! Our budgeting tool is the first of its kind. Anyone can use it. See your income, where you invest and save, and where you spend your money. Once you budget, you can find expenses to reduce or eliminate.
Find out where your money and debts are at! By filling out a personal financial statement using our Snapshot Tool, you see ALL of your finances on one page. As well as itemized details of assets, liabilities, and income sources! This will help you find savings you did not know you had and see all of your debts in one place.
Check out a few Youtube videos of people finding savings and paying off debt using My Financial Snapshot: