How to Get Out of Credit Card Debt
- Doug Thode
- Apr 7
- 3 min read
Credit card debt can be frustrating, overwhelming, and embarrassing, but you’re not alone. There are a lot of people out there who find themselves in a situation of ever-increasing interest rates, trying to make minimum payments, and having outstanding payments for an extended period. Take comfort in knowing there are solutions, and you can become debt-free with the proper support, guidance, and a financial plan.
Growing debts are alarming, but you can regain control of your finances and free yourself from debt by following some simple steps, including knowing your debt, planning how you will manage your debt, and learning how to remain focused to execute your plan.
Understanding Your Debt
Before you can start formulating ways and means to go about credit card debt settlement, you must comprehend your entire situation. Start by collecting all the information about each of your credit cards.
This includes:
Balance: The total amount that has been borrowed on each card.
Interest Rate: Also termed APR, this is the rate on borrowed money per year. The higher the rates, the more costs are incurred over time.
Minimum Payment: The least amount each month one can make to avoid falling behind and incurring late fees.
With this information, you can prioritize your payments and develop an approach that fits your unique circumstances.
Create a Budget for Your Credit Card Debt Repayment
Now that you have a clear picture of your credit card debt, it’s time to budget. Often, when a budget is mentioned, it’s viewed as a restriction on your spending. Instead, it should be seen as a means of managing your resources better.
First, keep a record of any money received or spent. Every dollar that comes in and goes out should be accounted for. As you assess your spending, look for areas where you can cut back; That daily coffee run or those subscription services you forgot about. Using those savings to pay your credit card balances will enable you to pay down your debt more quickly.
Organize Your Debt Payments
When using more than one credit card at a time, it’s easy to lose track of what you owe and when. This is why payment organization is essential.
One effective method is the "avalanche method". This strategy focuses on paying off the card with the highest interest rate first while making minimum payments on your other cards.
For those uncomfortable with the avalanche strategy, you can try the “snowball method”, which focuses on paying off a few small balances first. You can achieve some debt repayment goals quickly, generating momentum and confidence that your plan is working.
Getting Out of Debt: Strategies to Consider
If you have several credit cards with high outstanding balances and high interest rates, debt consolidation is a viable option. In this process, all the debts are combined to make one payment with a lower interest rate.
But, if you don’t qualify for a consolidation loan through your regular financial institution, you may be tempted to obtain a loan through a high-interest financing company. That will come with its own set of issues that can frequently make your debt situation worse than it was before. If you’ve been unsuccessful at qualifying for a consolidation loan through your financial institution, a Consumer Proposal may be the preferable alternative.
Balance Transfer Credit Card:
Some cards offer 0% APR (Annual Percentage Rate) for a limited time. Taking advantage of these cards will help you transfer the balances without accruing new interest while paying off existing debt. Just make sure you pay it off before the promotional period is over.
Personal Loan:
Paying off credit card debt with a personal loan can help you make one monthly payment instead of dealing with multiple credit card bills.
Home Equity Line of Credit (HELOC):
If you own a home, a HELOC can help you pay off your debt, but there’s a downside, as the use of a house as collateral carries significant risks.
Credit Counselling
Credit Counselling is a process for assisting you through education, budgeting, and other tools to reduce and ultimately eliminate your debt.
Staying Disciplined On Your Journey to Eliminating Credit Card Debt
Once you start the journey of eliminating credit card debt, maintain self-discipline. Avoid charging any extra bills on your credit cards when in the repayment stage, or consider getting rid of them completely. Beating credit card debt can be a daunting task. However, it’s absolutely possible when you are patient, dedicated, and seek the proper guidance to develop a personalized plan of action.
If you live in BC or the Yukon and are struggling with debt, consider contacting D. Thode & Associates Inc., Licensed Insolvency Trustees, and let us help you explore your options.
We’re here to guide you on your journey to becoming debt-free!
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