5 Steps to Get Out of Credit Card Debt

Unfortunately, there are thousands of people out there with credit card debt. It is a difficult position to get out of if you find yourself with credit card debt that you are finding difficult to pay back. However, do not become discouraged. There are steps you can take that will help you get out of debt. While it will not happen overnight and does take quite a bit of determination, if you stay focused, you can erase your credit card debts and get on with your life debt-free. Remember, even the best credit card rewards aren't worth living in debt!

Here are the five steps to get out of credit card debt:

1. Calculate your past and current debt.

The first step to get out of credit card debt is to calculate exactly how much debt you have acquired. Some people try to forget about their past debt, and it is not a good idea. The debt will not go away on its own. So, if you have debt on your credit score from the past, make sure you add that into your current debt. You cannot begin working on your debt until you know exactly the amount of money you need to pay off. 

2. Cut up your credit cards and build an emergency fund.

Just like Dave Ramsey, I suggest creating an emergency fund and cutting up the credit cards. The key is to remove the sources of temptation, and if you don't have any credit cards, it is difficult to get into credit card debt.  So after you have an emergency fund to cover the emergenies, lose those credit cards!

3. Negotiate the rates  

If you have high interest rates on your cards it is always a good idea to try to negotiate your credit card interest rates by calling them up. It doesn't always work, but what do you have to lose? 

4. Use extra money to pay down credit card balances.

When you are first starting to pay off your credit card debt, it is recommended to simply make the monthly payment. However, there are times when you may receive extra money. Put the extra money on your credit card for that month. It may be enough to lower your balance for the following month. The next two steps involve two instances where you may acquire extra money.

5. Use your income tax return to pay off credit card debt.

Your income tax refund is a great way to put more money towards paying off your credit card balances. There are two different ways you can use your income tax to help you get out of credit card debt. The first one is pay a specific amount toward your credit card balance at once. So, let’s say your credit card balance is $25,000, and the monthly payments including interest are $200.00 a month. Once you have received your return, you could put enough money in one month to cover three months of payments ($600.00). The advantage of doing it this way is the extra $400.00 will go to your principle because the interest for the month has already been paid. 

If you would rather break the money up over the course of a few months, you can place the money in a savings account and pay an extra $50.00 or so on every payment you make. The only problem is you need to make sure that you will not spend the money on something else.

6. (BONUS) Put money from yard sales, birthdays and holidays towards paying off credit cards.

The spring, summer and fall are great times to hold yard sales. Plus, you can get rid of some of the things that have been sitting around the house for years. You can make a good amount of extra money that will help you get out of credit card debt. Remember: Every little bit helps you with your credit card debt. Take the money you have earned from your yard sale, and put it towards your credit cards. In coming years, make it a habit to make a yard sale pile for the next nice weekend you have to perform a yard sale. You can also sell unneeded items online through community classified ad websites or auction sites.

Your birthday and the holidays are also times when people will give you money. It is a great way to add more money to your monthly payments of your credit cards. This is money that you were not planning on having, so it is easy to part with without tapping in to funds from your regular monthly budget.

The fact is you do not have to be in debt forever. Start with these five steps to get out of credit card debt, and you are on your way to freedom from debt. Commit to making at least the minimum payments on all of your credit cards each month, and then choose one – usually the one with the highest interest rate – to focus on paying off first. You can get out of debt by taking it one step at a time and sticking to your plan.