“7 Steps to Manage and Eliminate Credit Card Debt”

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In This Article:

• Evaluate Your Debt and Finances
• Limit New Credit Purchases
• Look for Ways to Increase Your Income
• Consolidate or Reduce Your Monthly Payments
• Select a Debt Payoff Strategy
• Keep Track of Progress
• Learn How to Use Credit Cards Responsibly in the Future

According to Experian data from the third quarter of 2023, the average American credit card balance has risen to over $6,500, marking a 10% increase from 2022. Paying off credit card debt on a tight budget can be challenging, especially with interest charges accruing each month. However, with the right strategies, you can trim your expenses, lower your monthly payments, and increase your income to tackle your debt effectively.

1. Evaluate Your Debt and Finances

Start by creating a clear picture of your debt and current income. This might feel overwhelming, but seeing all your balances in one place can give you a sense of control. Log in to your credit card accounts or check your recent statements to list your balance, APR, and minimum monthly payment for each card. Calculate how much money you have left after paying all your bills each month and create a budget that outlines your income, fixed and variable expenses, and how much you can allocate toward debt.

2. Limit New Credit Purchases

Switch to using cash or a debit card for purchases to avoid adding to your credit card debt. Keep track of your checking account balances to prevent overdrawing. If you have a budget, use it to monitor new purchases and hold yourself accountable to your debt payoff goals.

3. Look for Ways to Increase Your Income

If your current budget makes it difficult to reach your debt payoff goals, consider increasing your income. This could be through asking for a raise, changing jobs, taking on freelance work, or selling unused items. Set up an automatic transfer of this extra income to your credit card account each month.

4. Consolidate or Reduce Your Monthly Payments

If you have good credit, consider a debt consolidation loan or a balance transfer credit card to reduce your interest rate and monthly payment. A debt consolidation loan combines multiple credit card debts into one loan with a single monthly payment at a potentially lower interest rate. A balance transfer credit card allows you to transfer existing balances to a new card with a lower rate, often at 0% APR for a period of time.

5. Select a Debt Payoff Strategy

Choose a debt payoff strategy that aligns with your goals and motivation style:

• Debt Avalanche Method: Focus on paying off the card with the highest APR first to save on interest.
• Debt Snowball Method: Pay off the smallest balances first to gain a sense of accomplishment and motivation.
• Debt Management Plan: Consult a certified credit counselor to negotiate lower interest rates or monthly payments with your creditors.

6. Keep Track of Progress

Monitor your progress to stay motivated and understand how your approach is working. Use a spreadsheet or a note on your phone to track payment due dates, payments made, current balances, interest rates, and your target payoff date. Regularly check your credit report and scores to see your up-to-date account information and any changes as you pay down debt.

7. Learn How to Use Credit Cards Responsibly in the Future

Once your debt is paid off, use credit cards responsibly to avoid accumulating debt again. Regularly check your credit report, avoid relying on credit cards for nonessential purchases, and prioritize building an emergency fund to cover unexpected expenses.

The Bottom Line

Paying off credit card debt can be challenging, but with the right strategies and a clear plan, it is achievable. At O1ne Mortgage, we are here to help you with all your mortgage service needs. Call us at 213-732-3074 to speak with one of our expert loan salespersons and take the first step towards financial freedom.

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