Credit card debt mounts up easily, and there’s a simple theory for getting rid of it: you can’t climb out of a hole until you stop making it deeper. Here’s a ten-step guide to help you get out of credit card debt:
- Even if you think you have a low credit score and no grounds for negotiation, it’s still smart to ask your credit card company to lower your interest rate. Do this with all your credit cards.
- Make a list your credit cards, from the highest interest rate to the lowest.
- Make the minimum payment due for every card, every month, on time.
- Add as much to the minimum of your highest rate card as you possibly can.
- Continue this method until the highest rate card is paid off (don’t immediately cancel the card once you’ve paid it off, as this hurts your FICO score – simply hide it or expunge it with a pair of scissors).
- Now that the highest rate card is paid off, take the amount you were paying on that card and apply it to the payments of the second-highest-interest-rate card. Continue to make the minimum payment due on all the other cards.
- As your credit card debt decreases, your FICO score should rise, and eventually you can qualify for cards with lower rates or transfer your remaining debt to a card with an initial rate of zero percent.
- If you still can’t transfer all of your debt onto the new, lower-rate card, simply focus on moving your highest-rate debt to the new card.
- Continue this process until all your cards are paid off
- Don’t dig another hole! At this point, you can cancel those cards, or learn to use them responsibly and not use them to purchase more than you can pay off at the end of the month.
Remember, the best way to get out of debt is to stop getting into more debt. If you can’t reduce your spending habits and put more toward debt reduction, you’ll never gain the financial freedom you so desperately want and need.
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