How to Pay Down Credit Card Debt: A Three-Step Plan

If you have credit card debt, you are far from alone. About three in four Americans have a credit card, and of them, over half have a balance on their credit card. In fact, the average unpaid credit card balance was $3,389 in 2010, and many consumers’ financial situations have led to increasing debt since then. However, a dire economic situation doesn’t have to mean drowning in credit card debt.

Paying down your credit card debt is an admirable move, and it will free you from worry about the companies calling you, the ever-climbing number on your statements, and what you’re going to do. Some people avoid their debt by focusing on shopping and spending, which only makes it worse. Even if that was you in the past, you can always do something different right now and get out of debt. Here is a three-step plan to help you pay down your credit card debt.

1. Make a budget as soon as possible.
If you don’t already have a budget, you need one. There are many programs, strategies, and methods of budget creation. Some people prefer envelope budgets where you only have a certain amount of money to spend on each CatID, and if you run out, you run out. Others with a flexible income and a bit of savings prefer to budget based on last month’s income instead of planning to make more money next month. You can use computer applications or pencil and paper, but you need to know your spending habits. You also need to know the balance you have on each card and what the interest rate is. If you don’t, you can’t get out of debt.

2. Arrange your debts in one of two ways.
If you’re the type who needs to see there’s something happening, pay your debts down in order of smallest to largest debt. You’ll make the minimum payment on every card, but every extra available dollar goes onto the card you’re focusing on. Once that is paid off, you’ll have more money free to focus on the next card, and so on. The other way requires more discipline as it will take longer to see results. If you choose this way, pay your debts down in order of highest to lowest interest rate.

3. Keep focusing when it gets hard.
Starting a credit card debt plan is easy. Following through with it is a different story altogether. Many people give up on their plans as soon as they use their credit card again, or when they have an unexpected expense and can’t afford to make as much of a payment as they planned to make. The key to success is not giving up when it gets hard. If you find you still have a credit card addiction, don’t carry your card with you rely on cash or debit. Watch debt-reduction programs like Gail Vaz-Oxlade’s Canadian TV show “Til Debt Do Us Part” and keep a reminder card in your wallet in front of your cards with a statement about how important being debt-free is to you. Make paying off your debt your main priority until your balance is paid off.

Once you have a strategy and you’re determined to put it into action, becoming debt-free is not as hard as it may seem. The numbers may seem intimidating, but steady progress will keep you moving until you find yourself free of credit card statements. Once you have paid off your debt, feel free to

 Author Sam Jones is often asked how to get out of debt. He suggests that uSwitch credit cards information pages  are one of the best resources for finding out about debt related issues

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