Millions of Americans are struggling with out of control credit card debt. A recent analysis by NerdWallet found that the average amount of credit card debt for a U.S. household is roughly $15,000 today. The interest payments on credit card debt is high, typically in the double digits, draining a significant amount of wealth from American households. To reverse this trend, Americans have to get serious about reducing their spending and eliminate credit card debt. Here are three steps that will help do that.
Take Charge Of Your Finances
Taking charge of your finances is the first step to eliminate credit card debt. This means creating a budget and tracking your spending. This will help you determine where overspending is occurring and contributing to your debt. It will also help you identify where cuts can be made to have more money available for paying off your credit card debt.
Create A Repayment Plan
Once you have your finances figured out, you can create a plan for paying off your credit cards in the shortest amount of time possible. It is important that more than the minimum amount is paid on your credit card each month if you want to eliminate credit card debt, as the minimum payment only covers the interest for that month and 2 percent of the balance. Plan to make each payment well before the due date to ensure that you won’t get hit with late fees for payments that do not make it by the deadline.
If you have multiple credit cards, it is often easier to tackle them one at a time. Make a list of each of your debts, along with their due dates, minimum payments and interest rates. Make sure you can pay the minimums on all of them, then devote any additional money you can spare for debt repayment to the debt with the highest interest rate. After that card has been paid off, move on to the next one on the list and so on, until all of the balances reach $0.
Determine A Debt-Free Deadline
You are more likely to stick to your repayment plan if a debt-free deadline has been established as part of your repayment plan. Having a deadline gives you a tangible goal to aim for and forces you to devote your time and resources to meet it. It also can reduce your stress by showing you when debt will end and help you resist the urge to spend. If your credit card balances are high, you can use a debt payoff calculator to find out how long it will take you to get rid of your debt with predetermined payment amounts.
Confronting the problem and taking these steps can help you eliminate your credit card debt quickly and with less stress.