Explore How to Get Out of Credit Card Debt Step by Step

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Last Updated: October 21, 2020

One of the worst things about credit cards is credit card debt. It is expensive, and it can take years to claw your way out of it. Meanwhile, your credit suffers, affecting your ability to finance a car or rent an apartment. In some cases, your credit affects whether you get the job you want. Fortunately, we can help you find out how to get out of credit card debt.

Build Your Credit Card Payoff Plan

Nothing is possible without a detailed plan. That’s why the first step to your debt-free status is building a workable payoff plan to reach your goal. These Credit Card Payoff and Credit Card Payment calculators can help you do this more easily. You can find out how long it will take you to escape from your debt, how to reduce this time, and how much your monthly payments should be to get out of your debt within a specific period. The most important thing to do is to set a specific date when you pay off your credit card debt completely.

Prioritize Your Credit Card Debt Payments

List all your credit card APRs from highest to lowest. Although there are two methods of paying off debt – debt avalanche and debt snowball, we recommend that you pay off your credit card with the highest APR first. This will allow you to get out of credit card debt faster.

Pay at Least Minimum Amount on Each Debt

You should be paying at least the minimum amount on the credit card loan every month. It keeps your credit rating in good standing. The card company will report your account as delinquent if you don’t pay after 30 days. Not paying this minimum means your card company can issue a late fee or a penalty annual percentage rate (APR). Yet, minimum payments are usually so small that it just about covers the interest on your balance. If you can afford to pay a little more, that’s even better. Put that extra money towards the card with the highest interest rate first. When that debt is cleared, put your extra money towards the next highest rate.

To calculate your minimum payment, a credit card company will use the following formula. For a statement balance of $11,000 and a flat fee of 2% (0.02)

Minimum Balance Payment = Statement Balance x Flat Fee = $11,000 x 0.02 = $220

Or… you can use this handy Credit Card Minimum Payment Calculator. It can calculate the minimum monthly payment, and the number of months to pay off your debt. You’ll see you how much you are paying in interest, and how much this debt will really cost you. It even shows how every payment is broken up into interest and principal; and what your balance will be.

Get Out of Credit Card Debt by Asking for a Lower Interest Rate

Ask and you shall receive! Request a lower interest rate from your credit card company. Should that person say they can’t lower your interest rate, ask to speak to their supervisor. If your payment history on your credit card is good, you can use this as leverage in your request. The worst they can say is no; but if you are successful, you will save you money on interest. This will help you get out of credit card debt.

Reduce Credit Card Debt

Consider a Consolidation Loan

You may be able to group all your debt together into a low-interest loan, effectively reducing your interest rate. The two most common options are a home-equity loan and a home equity line of credit. If you are eligible, you must stop accumulating debt while paying off the new loan. These loans may be dangerous, especially if you turn to loan shark lenders. Make sure you’re going to work with a reliable lender and the APR on your new loan is lower than the one you have. Otherwise, you can go even deeper into debt and even lose your home.

Trim Your Budget to Get Out of Credit Card Debt

Take a look at what got you into trouble in the first place: your spending. Where is your money going? Can you reduce your spending in one or more ways? The money you save by reducing your spending can be used to pay off more debt.

Talk to a Professional

When all else fails, talk to a certified financial planner or credit counselor. Make sure these are not-for-profit organizations that offer help with financial planning.

Most people think that a financial professional is expensive. This is false. A number of non-profit agencies provide access to financial professionals who may be low cost or free. Work with one to figure out a reasonable plan that will help you get out of credit card debt over time. Your financial advisor must be able to explain the complexities of your financial situation so that you can understand it. If your financial professional doesn’t do this, get a new one.

In a case where your debt seems impossible to pay off completely, you may consider bankruptcy as an option. However, bankruptcy has serious, long-term consequences. Consult your financial professional to see if it is the best option for you.

Now you know how to get out of credit card debt. With a little work, some time, and patience, you’ll soon be debt-free.

Roman Zelvenschi

I started a digital marketing agency Romanz Media Group Inc. 12 years ago. Running my own business quickly taught me the importance of cash flow. Making sales was not enough, I had to have money in the bank to pay the vendors, staff and personal bills.

During those early stages of the company I learned how to get creative with debt and to save on interest cost. I paid for everything I could with a credit card to both get more points and to extend the payment date by 25 days (credit card grace period). I then utilized a 0% balance transfer offers to rotate this debt.

I learned a lot during this process and made a lot of mistakes. My key lesson is that the most important part of being financially independent is how much I managed to save, rather than how much I earned. Staying disciplined with savings and tracking spending is not easy and I tried many different methods to stay on track.

FinancialFreedom.Guru is a side project where I and my staff are trying to share the practical knowledge on how to understand finances and to build wealth.

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Heidi Ann
Heidi Ann
5 days ago

My personal plan how to reduce credit card debt – I still have a full time job and paycheck, so I put my entire stimulus check and my tax refunds on my credit card debt. I also picked up hours teaching summer school via Zoom and have been putting that toward it too. At this rate, I may have my credit card paid off by the end of the year! Then I can focus on student loans!

5 days ago

I did a balance transfer of my credit card debt to a card with 0% interest for 18 months. There was a fee for $100 but I was being charged more than that in interest every month