How To Eliminate Credit Card Debt?

By: Frank Makrides

Updated on November 10, 2020

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If you’re looking for how to eliminate credit card debt, you’re not alone. Did you know that the average household in the United States has over $8,000 in credit card debt according to debt.org? There are many ways to approach this, we’ll outline a few fast and simple ideas for you.

To start things out, watch my YouTube video below for a detailed overview of what you need to do to pay off your debt fast.

How to get out of credit card debt without ruining your credit

The easiest way to lower your credit card debt, and the only way to do so without affecting your credit, is to pay it off quickly. Having a concrete plan for doing this is essential. This plan should include: making and sticking to a budget, setting money aside for paying off debt, and knowing your numbers so you can make your dollar stretch the furthest and pay off your debt the most quickly.

Make sure your personal finances are in order

It is critical that your financial foundation is in order prior to you eliminating your credit card debt. It is assumed at this point that your personal finance, budget and debt situation are in order or at least on track. If not please click on the above links for all of my articles, free tools and information to get you going.

Once you have your budget in place and you maximized your monthly cash flow, you should be able to find some additional funds to help you eliminate your credit card debt.

Make sure you also watch my YouTube video below on budgeting.

Track your debt elimination for free with Credit Karma - Free Credit Score and Credit Report

Click on the link to the free “Credit Reports and Credit Scores” guide from the Federal Reserve.

With Credit Karma, you can check your current credit score and they will provide you some tips, tricks and ideas for free to help you immediately improve it if needed.

This is going to be critical for you so that you can track your progress as you start chipping away at your credit card debt.

If you want to learn more about how to get your credit report for free, check out my YouTube video below.

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Monitoring your credit score on an ongoing basis is part of your ongoing journey to financial wellness. The best company out there for this is Credit Karma. You can access your credit score and credit report anytime you need it. I continue to use Credit Karma to this very day. The best part of all is that it’s free. If you haven’t signed up already go do it today.

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Don't miss your payments

If you do not pay on a credit card debt for more than 180 days, the company will write your debt off as a loss. If this happens, you can expect a huge impact on your credit score. Many companies are willing to negotiate with you in order to avoid this from happening, it is better for everyone to prevent non-payment.

Pay more than the minimum payment

Use my free debt calculator and find out how much of your monthly payments are going toward principle vs. interest. This will help you quickly and easily put together your debt payoff plan.

FREE Debt Calculator

Quickly sort and list all of your debts all in one place. Based on your inputs it will provide you interest owed and a time frame that you can expect to pay down your debt. So what are you waiting for? Download this essential FREE tool today!

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The principle is the amount of debt you owe at the end of each month. Interest is how much the company is charging you each month. Most credit card companies have their minimum payments set to allow you to pay your interest off each month, but not much of your principle. This keeps you in debt for the longest amount of time and earns them more money.

For example, you have $10,000 of debt at 18% interest, your likely minimum payment is around: $150. If you are paying $150 each month it will take you 28 years to pay this off, and it will cost you over $40,000 in interest.

Instead, say you pay: $175 per month. This decreases the interest paid to just under $13,000 and you will have your debt paid off in 11 years.

If you can afford to pay $200 per month, you will pay about $8,000 in interest and pay your debt off in 8 years.

As you can see, paying more than the minimum monthly payment can drastically change how quickly and easily you pay off your debt.

Debt Snowball vs. Debt Avalanche

You have already heard about these payment strategies for paying off credit card debt. Both are designed to motivate you as you see progress being made.

The debt snowball method usually begins with choosing the loan with the smallest pay off amount to focus your efforts on first. Decide how much money you can afford to put toward your debts each month. Then pay the minimum required payment on all the other credit cards, and put all the extra money you have set aside toward this smallest amount. Once you have paid that off, you select the next smallest pay off amount to focus your efforts on.

The debt avalanche is designed to save you the most money. This option instructs you to choose the credit card with the highest interest rate to pay off first. This allows you to pay the least amount of interest over time. The debt avalanche also typically allows you to pay off your debt the most quickly.

Regardless of which method you choose, the most important aspects of making these systems work is to:

1. Have an amount per month in your budget dedicated to paying off your debt. And don’t decrease that amount as you pay off the loans, keep paying the same amount and you will pay off your loans faster.

2. Spend less than you earn, start saving in addition to paying off your debt so you can avoid debt in the future.

3. Use my free debt calculator to plan and execute your debt payoff strategy.

Talk with your creditors

Communicating with your creditors is another option. Some are willing to negotiate with debtors directly and others require representation from specialists.

How to negotiate credit card debt settlement yourself

If you have a good history of making payments on time, there are many creditors who will work with you to negotiate the terms of your repayment and may even offer hardship programs if you have a specific reason for being unable to make continued payments. Many companies will consider lowering your interest rate or waiving fees if you negotiate correctly. There is really no downside to communicating with your lender, the worst they can do is say no.

Click on the link to the free “Sample Letter for Disputing Errors on Your Credit Report” from the Federal Trade Commission (FTC).

Check your statement

Your creditor will include a phone number to reach their company on your statement each month. This is the number you can use to contact them and negotiate. Many have extensions specifically for this.

Know your numbers

Prepare yourself for your phone call. Have a record of your debt, your payment history, your interest rate, and how much you can afford to pay each month. This way, you can be more effective as you advocate for yourself.

Help with credit card debt

Sometimes there are situations where your circumstances are such that you cannot pay your debt off by yourself. This can be an extremely stressful situation and requires help to solve the problem. Most people in this case rely on three options.

1. Debt management plans are frequently used by non-profit groups (typically called credit counseling organizations) who counsel you and negotiate with your creditors for you. Typically they will consolidate your debt for you, then you will make payments to the non-profit group until the debt is paid off. This option often requires that you do not apply for or use new credit cards for some time.

2. Debt settlement is the most ideal option, as mentioned before, this means the credit card company agrees to accept less than you actually owe rather than requiring you to pay the full amount. This is unlikely to happen for most debtors and generally requires the hiring of a company to represent you. These companies are often for-profit companies, which means that they make money by helping people in these situations. Be sure that you are aware of the risks of using for-profit companies, there are many that require initial and monthly payments that can be difficult to maintain, and most do not guarantee that they will be able to settle your debt – but they keep the initial payment you have made to utilize their services.

3. Bankruptcy is probably the most well-known way to deal with debt problems. However, it comes with the most significant ramifications. First, you will have to report that you have filed for bankruptcy any time you apply for loans in the future. The bankruptcy is listed on and affects your credit scores for several years. There are also several types of bankruptcy. The most common in chapter 7 and chapter 13. You will have to counsel a specialist in order to know which is the best option for you. It is best to avoid bankruptcy if it is at all possible.

Credit Card debt consolidation with Payoff.com

Payoff.com offers personal loans from $5,000-$40,000 in order to help you pay off your credit card debt more easily. These loans have fixed monthly payments, no late payment fees, and have lower interest rates than credit cards.

What are the benefits?

• Instant credit score boost

• Fast application process

• Great customer service

• Specific to credit cards

• Education to help with future money management

This last benefit is one of the best things about this option. Getting a personal loan can be like a band-aid, but because Payoff.com strives to inform you about your personality, stress, and cash flow; they can teach you how to manage your money better in the future to avoid further debt.

If you are dealing with credit card debt, there are many ways to deal with it. If you cannot afford to continue making minimum payments and the debt snowball or debt avalanche are not possible for you, then Payoff.com personal loans are an incredibly easy way to make your payments more affordable, get out of debt faster, and avoid long term issues with your credit score.

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Payoff is a one-stop shop for you to be able to consolidate your debts up to $40,000 into one lower interest personal loan. They offer no application fees, no commitments, personal support and when you apply it doesn’t impact your credit score. You choose the terms of your loan and once you’re satisfied you have the funds to pay off your debts.

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Summary

If you are dealing with credit card debt, there are many ways to deal with it. If you cannot afford to continue making minimum payments and the debt snowball or debt avalanche are not possible for you, then Payoff.com’s personal loans are an incredibly easy way to make your payments more affordable, get out of debt faster, and avoid long term issues with your credit score.

Whatever path you decide to take, you must take action, take your debt head-on and eliminate it as quickly as you can possibly afford to.

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Frank Makrides

Is a former financial technology industry executive, licensed realtor, real estate investor, an award-winning speaker, has been published, holds multiple patents and is passionate about all things personal finance and entrepreneurship. He is also a proud husband and father of 2 amazing children.