Ryan Guina is an entrepreneur and writer. He has worked for Fortune 500 companies and served six years in the USAF. He writes about money management and small business topics at Cash Money Life and military money topics at Military Finance Network. You can follow his twitter feed here.
By now you have probably heard about the new Credit CARD Act and how it is giving consumers new protection against the credit card companies. In a sense, this is true. But it won’t do everything for you. The Credit CARD Act is there to give you some protection from credit card companies raising rates without notice, and require more standardization in the industry. But it’s up to you to pay off your credit card debt. Today we are going to show how to do just that – and do it quickly!
Step 1: Assess the Damage
Let’s face it – you’ll never get anywhere if you tell yourself lies or sugarcoat the truth.
Go grab a copy of your most recent credit card statement(s), lay them in a pile, grab a sheet of paper and draw three columns. Write down how much you owe on each card, the interest rate and the minimum payment.
Step 2: Make the Commitment
Make the commitment to getting out of debt. Don’t just say to yourself, “Yeah, it would be nice not to owe any credit card debt.” Tell yourself, “Yes, I’m going to stop using my credit cards and I’m going to get out of debt!”
Mean it and do it!
Step 3: Prioritize
Determine how much you can pay to your credit cards each month; you will want to pay as much as you can possibly afford without hurting your cash flow because making minimum payments will keep you in the poor house. Take a look at the list you made in step one and pay the minimum payment on every card, but more on your card with the highest interest rate. You can throw any extra money you have towards the card with the highest interest rate each month.
Repeat this step until you eliminate the card with the highest interest rate, then direct the most money to the card with the next highest rate, etc. until your credit card debt is eliminated. This will save you the most amount of money and eliminate your credit card debt the quickest.
Step 4: Use Extra Money
To get out of debt as quickly as possible, you need to be willing to use any and all funds you have at your disposal in order to eliminate your credit card debt. That means bonuses, found money, rebates, overtime checks and even that tax refund you may have coming your way should be applied towards debt.
Step 5: 0% Balance Transfers (Advanced Users Only)
Why is there a disclaimer on this step? Because 0% balance transfer cards are not for everyone. A 0% balance transfer card allows you to transfer your credit card debt to a 0% interest rate. What’s the catch? Well, you have to open a new credit card and you may have to pay a fee to transfer your balance to the new card.
That said, you can pay a fee as low as 3% to transfer credit card balance that may be in the 20 percent range. The savings potential is huge. But you have to have good credit to qualify and you have to be committed not to continue using your credit cards, otherwise the savings isn’t as effective.
Step 6. Enjoy your new life without debt
Once your credit card debt has been eliminated, make the commitment to living without the plastic. You can then enjoy your life without the stress of credit cards and the never ending payments and hassles. Trust me – it’s worth it!