Credit Card Debt: Ways to stay out of credit card debt for good

Negotiate for a lower interest rate: Lay out all your credit card statements from various credit card companies. One by one, call the customer service center and ask to get a lower interest rate on your cards. Often, companies will work with you and grant you a lower interest rate in hopes to retain your business.

Don’t accept new credit card offers: One key to getting out of debt is to stop acquiring new debt! While working on becoming debt free, it’s obviously best to avoid accepting any new credit card offers. One to two credit cards is usually the maximum amount any individual or family needs. Eliminating one debt, and adding another, only gets you falling back into the same pattern. While stores might offer you incentives—such as 10% your current purchase, or 0% financing for 12 months—avoid adding to your debt at all cost.

Consider credit card consolidation: Credit card consoldiation does not eliminate your debt. Consolidation means taking your multiple credit card debts and rolling it into one more manageable loan, usually at a fixed and lower interest rate. With a lower interest rate, you may be able to pay off your debt faster.

Work a second job: Being serious about getting out of debt means throwing as much money as realistically possible toward your cards. This may mean taking a second job to earn extra income you can devote to erasing your debt. Having a second job also means there is less free time to devote to expensive habits such as shopping or going out to eat.

Proper insurance: A large portion of debt is caused by large medical bills, or other difficult situations caused by an emergency. It pays to make sure you are properly insured. Check your health insurance, car insurance, life and homeowner’s insurance to make sure you are adequately covered for emergencies.

Make a budget: Making a budget helps you identify how much money you are able to spend each month to pay off your debt. It also helps identify areas in which you could cut spending or increase savings. Once out of debt, a budget is a great tool to help you meet your goals without falling back on credit cards.

Get organized: The first step of getting out of debt is learning about the situation you are in. Begin by gathering all your credit card statements and bank statements. Make a budget. List your credit cards, with balances, from the highest interest rate card to the lowest. Make goals for how much you want to put toward each card, each month.

Build emergency fund: Building an emergency fund is an important step. By having an emergency fund (three to six months living expenses in a liquid cash account) means that if an emergency occurs you don’t have to rely on credit cards or incur further debt.

Pay cards with highest interest rate first: As a general rule, it makes sense to pay the cards with the highest overall interest rate first. Since debt grows exponentially, the idea is to hit the biggest ones first to decrease the overall amount of interest you will pay back.

Use online calculators: There are lots of tools available to consumers online to help with your debt free plan. Use online calculators to assess how long it will take you to pay off certain cards based on your balance and interest rate.

Move into a smaller place: If your debt is extravagant, you may need to take extravagant steps to decrease it. This may mean moving into a smaller or less expensive apartment or home. If you’re currently renting and there are vacancies in your area, you may try negotiating with your landlord for a decrease in your rent payment. Use these extra funds to wipe away your debt faster.

Eliminate any unnecessary expenses: Drastic changes such as moving may not be realistic for your situation. If not, find other ways to cut back your current expenses and use this extra cash flow to pay your credit card bills. Eliminate vacations, shopping sprees, eating out, gym memberships, or anything you are willing to sacrifice to meet your debt free goal.

Do it with a friend: Work with a buddy and encourage and hold one another accountable. Share tips and advice with one another and provide support.

Pay more than the minimum required amount: Always pay more than the minimum payment. If not, the interest accumulating on the balance of the loan will make it difficult for you to keep up with the repayments necessary.

Credit counseling and education: There are various credit counseling programs which provide debt management education. Sometimes these are offered locally through government programs or church programs. Also, if you use a debt consolidation firm, it’s likely they will offer free credit counseling as well.

Pay on time: Pay more than the minimum required payment, and pay it on time. Eliminate any late fees and use that money toward the balance of the loan instead.

Make a calendar: Create a calendar to stick on your fridge or in your office. Write down due dates (a few days in advance) for each of your credit cards. This will help you avoid late payments.

Create online bill pay: Most banks offer free online bill pay. Set this up automatically so that payments are made to your credit card companies on the correct day. This will also save you money in postage stamps and envelopes.

Cut up the cards: For purposes of your credit score, it may not be adventageous to close old credit card accounts. However, that doesn’t mean you have to use them! Cut the cards up and pay in cash.

Reward yourself: Eliminating debt is a major accomplishment! Treat yourself each time you reach your goal. This can be something small such as going out for ice cream or treating yourself to a manicure.

Read up: There are great books you can check out from the library that help you reach your goals to become debt free. Try reading Dave Ramsey’s “The Total Money Makeover.”