A Guide For Getting Out Of Credit Card Debt

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Whatever it was, I’m glad you are now convinced – credit card debt is bad.

Credit card debt will easily destroy your plans for any kind of a sensible financial future.  So, good for you.  Let’s get rid of the credit card debt so you can get out of debt.

Get Out of Credit Card Debt: The 8 Steps

1.  Remember that things will probably get worse before they get better.

Many credit card users float payments.  This means you typically spend next month’s dollars by using the credit card today.  Basically, your cash flow is upside down and backwards.  You must stop this habit.  The first month will be the hardest.  In fact, when you first get rolling, it will seem like you are trying to fit two month’s worth of expenses into one billing cycle.  Basically, you are.  You will be paying this month’s expenses (in cash) and last month’s expenses (that you charged).

On the front end, you will feel like the work is not worth the reward.  I encourage you to really work at this for the first couple of months because your gratification will be delayed.

Remember when the Israelites left Exodus?  Things got worse before they got better.  The Israelites, in fact, wanted to go back to Egypt.  After just a few weeks, you will want to go back to the old way because it was easier.  Please don’t.  Do what is right, not what’s easy.

2.  Get organized.

Typically, if you have credit card debt, it is because you are not naturally an organized person.  That’s not bad, but you will need to organize your finances before conquering your debt mountain.

Here is exactly what you need to know:

  • Which credit card accounts are active?
  • How much do you own on each card?
  • What is the interest rate?
  • When is the next payment due?
  • What is the minimum payment?

Here’s a free debt snowball spreadsheet to help you get organized.

3.  Get motivated.

Only a small fraction of personal finances has anything to do with math (pun intended).

The larger factor is attitude and discipline.  Do you have the attitude necessary to get out of debt?

You need to commit to become debt free.  You need to be willing to sacrifice and willing to make changes.

Your greatest asset during this time will be your financial focus and motivation.

4.  Don’t take on any more credit card debt.

If your bath water was running out of your tub because you didn’t have the plug in, would you turn up the water, or would you plug the tub?  Most likely, you would put the plug in.

Your credit card payments are the leak in your personal finances.  By not making any new purchases, you are actually starting to make progress in the right direction.

Three things you can do with your old credit cards:

  1. Destroy them: completely remove the temptation to charge on your credit card.  Cancel your card.
  2. Freeze them: it’s going to take a few hours to defrost, so at least you won’t use it before you have a lot of time to think things over
  3. Hide them: Have a friend take the card and hide it somewhere safe.

5.  Find money by making a budget.

The best place to find money is in your regular pay.  If you do not keep a written budget, there is money to be found in your own paycheck.  Learn the secret to a successful budget.  Here’s a step by step guide on how to make a budget.  If you’re a first time budgeter, here is a sneak peak into our budgeting process.

If you cannot find money in your budget, then you probably need to increase your income.  This means getting a second job.  Here are a few good part time jobs.

6.  Get current on credit cards.

Make the necessary payments to get and stay current.

Tread Water on the balance of all but one card

This is where financial focus is essential.

Be content not to make any progress on all but one of your balances.  Then attack that balance like crazy.

7.  Start paying off credit card debt.

So which card should you focus on paying off first?

There is a lot of debate on the topic.  Here are three frequent methods. You decide which works best for you.

  1. Pay off the balance with the highest interest rate first. This approach makes the most mathematical sense, but we’ve already concluded that personal finance is about a lot more than math.
  2. Pay off the lowest balance first. As you pay off this small balance you have a psychological win.  Then you take that money you were paying on the first balance and apply it to your next smallest balance.  This method is frequently referred to as the debt snowball and is endorsed by Dave Ramsey.
  3. Pay off the debt you hate the most first. Perhaps there were circumstance around why you got a particular debt.  You hate the fact you got the debt and hate even more how you got the debt.  You will get the biggest emotional payoff if you get rid of this debt first.

I think there is a lot of value in the debt snowball, but to help you make the best decision, here are more ways to get out of debt.

8.  Keep going.

There will be setbacks along the way.  But, don’t let them discourage you.  There are many people who are also getting out of credit card debt, and they are a testimony to both how difficult it is and how rewarding it is.  The process might be years, but when it is finished, it will be worth the effort.

What did you do to get out of credit card debt?  What suggestions do you have?


  1. says

    It seems to make sense to pay off high interest cards first mathematically speaking. But like Dave Ramsey says, if you were using math you would not be in this mess in the first place. ;)

    Dave teaches to pay off the debt lowest balance to highest. Ignore interest. This gives you early successes to help keep you motivated.

    I suppose you could do the higher interest rate first, but I chose to do it Dave’s way personally.

    • says

      Thanks for your comment. The whole math vs. motivation question is an interesting one. I think it does depend on your personality. So many people have sucessfully used the debt snowball so I guess I tend to favor it a little bit.

  2. says

    The best way is to only use cash and start paying off your credit cards. Some cards have a zero interest for 3 years if you transfer your balance. Most of the time it has a lower interest rate then your current balance after the 3 years. You have to pay a 3% fee but in the long run it’s worth it!

  3. says

    Credit card concept was not intended for burying people into indebtedness. It is a mode of financial institutions to help people be financially viable in times of need, like bulk purchases, it gives safety because people will use card instead of handling cash and so on. However, due to personal whims and mismanagement, some people get buried (and I have been there). One mistake that I had before was taking advantage of the so called “promotions” that credit card companies are giving to credit card holders. It was late already when I realized that they are giving away those gifts but I don’t actually need them. For example, I have to spend 1,000 credit in order to get pizza. Then I’ll find myself having a hard time in budgeting by the next month when the bill comes in. But thanks to articles like this. Now, I am no longer a victim of financial burdens.

    • says

      Thanks for sharing your experiences. Your right that the misuse of credit cards is really the problem not the credit card themselves. That said there are some people who shouldn’t be trusted with credit cards. If I had credit card debt problems I’d cut my card up in a second.

  4. Norma Jean says

    I have downloaded the snowball spreadsheet. Is there a way to mark it off once you make a payment? Delete a column?? Thanks

    • says

      I would just highlight the column. You don’t want to delete it because it would be a good reminder of what you’ve already accomplished.

  5. says

    Hi Craig, you have some good suggestions about getting out of debt.

    With the real estate bubble bursting , a lot of people here in Orange County, CA have lost their homes, maxed out credit cards, and have been forced into renting a home instead owning. Their credit has taken a major hit and they are going to have to work to rebuild it.

    I think that for many people, paying off the lowest balance first may be the best thing to do. It can be a small but important bit of positive affirmation that they still have some control over their life and that they can move forward through these difficult times.

    For many people, renting a home will be the best and possibly only option for a while. It may take two to seven years for them to rebuild their credit to a level allowing them to buy a home again at a decent interest rate. Thanks

  6. says

    The debt snowball works for alot of people. Some people might not even attempt to pay off their debt if they started with their high interest rate debt first. The debt snowball psychologically makes you feel that you are accomplishing something and then in turn you pay off more debt.

    • says

      I think your psychological DNA really impacts what makes you feel more energized. I have a cousin who likes boxing – it gets her adrenaline pumping. Not me. What really energized me to get rid of debt was high interest rates and the loss one every dollar. There simply is not a right way to do it, but you’re right that lots of people have found the debt snowball to be an effective method.

  7. says

    Hey Craig,

    Great Post; it’s really key that people get organized with their credit cards. I’ll pass this on to a number of young adults. The best thing we can do is teach our younger generation on being responsible on using Credit Cards for positive ways before they get in debt.

  8. says

    The best way that I have found to pay off credit cards is to pay off the credit card that has the highest minimum payment and the lowest balance.

    This way you get a large minimum payment off your back and then after paying off the card you can apply that larger payment to the next card that has the highest minimum payment and the lowest balance.

    In very short order you will be paying off credit cards faster than you thought possible.

    And before you know it you will be debt free on your credit cards.

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