Make 2019 the Year You Dig Out of Credit Card Debt With These 5 Steps

Americans are drowning in debt, but you can still get control.

The reliance on plastic is the American way. Year after year, credit card balances continue to inch up, and by the third quarter of 2018, credit card debt in the U.S. reached $0.844 trillion — a $15 billion increase from the previous quarter.

Take a look at a quick view of American debt statistics to see where you stand:

Household Debt and Credit Statistics, Q3 2018
Debt CategoryQuarterly Change

(Billions $)

Annual Change

(Billions $)

Total as of Q3 2018 (Trillions $)
Mortgage(+) $141 (+) $397$9.140
Home Equity Line of Credit(-) $10(-) $26$0.422
Student Loan(+) $37(+) $85$1.442
Auto Loan(+) $27(+) $52$1.265
Credit Card(+) $15(+) $36$0.844
Total Debt(+) $219(+) $557$13.512

Source: Federal Reserve Bank of New York

With the average credit card debt per borrower reaching $5,580 in the third quarter of 2018, according to the TransUnion Industry Insights Report, it’s important for consumers to take steps to reduce their debt now before it spirals out of control. Carrying that same credit card balance will also cost you a bit more in 2019, thanks to interest rate hikes by the Federal Reserve. The year ahead is filled with uncertainty but during the most recent Fed increase in December 2018, the central bank hinted it might raise rates twice before 2019 ends.      

Here’s how you can stop maxing out your plastic and make 2019 the year you pay off your credit card debt.

How to Get Out of Credit Debt This Year

There isn’t one right way to get out of credit card debt. There are, however, several strategies that can help you pay off debt and free up funds to invest, save for retirement or just have a little extra spending money to enjoy life.

1. Create a Payment Strategy

The average American household credit card debt is $5,580. But no matter the amount you’re dealing with, you need to have an organized approach on how to pay it all back.

First things first, total up all of your balances. From there you can decide if you want to take the avalanche route and pay the highest interest cards first or go with the snowball approach and pay the lowest balance first. The idea with both strategies is that you’ll make demonstrable gains that will keep you on track.

Goal setting is great, but goal setting according to a timeline is even better. Once you have your game plan in place, set specific and measurable goals for where you realistically think you’ll be by the end of the year. And if your credit card debt won’t be paid in full by New Year’s Eve, don’t get discouraged.

Find Out: The One Credit Card Debt I Don’t Pay in Full

2. Re-Evaluate Current Expenses

To tighten the proverbial belt, you’ll have to get used to living with less. But don’t tighten the belt so much that you deprive yourself of fun or luxury items — a hardline turn in the opposite direction isn’t a sustainable strategy on the road to paying off credit card debt.

Comb through your statements or use apps like Mint or Mvelopes to identify your spending vices or where you spend the most money. By eliminating monthly subscription services like Spotify or Hulu, or making simple swaps like store brand to generic, you could save hundreds or thousands per year.

If you’re really committed to spending less on items like clothing and homewares, you can find some treasures this year. Thanks to Japanese organization professional Marie Kondo and her new Netflix series “Tidying Up with Marie Kondo,” consignment stores and donation centers are flush with items that didn’t “spark joy” in others and are now being sold at steep discounts. 

3. Go on a Cash-Only Diet

Going cash-only in an increasingly cashless economy does present challenges, but personal finance experts swear by this method as a sure-fire way to track the money that’s coming in and going out. For some, seeing the outlay of physical bills for every expense sinks in versus the mindless swiping of debit or credit cards.

Rather than eliminate modern-day conveniences like automatic bill pay, budget how much money you’ll need for groceries, household products, entertainment, clothing, activities and dining out, then take out that much in cash. The mindset shift takes a lot of self-control, but once your cash is gone, it’s gone. The primal realization just might force you to break bad spending habits and pay less in pricey interest and rising credit card fees.

Try These: Tips to Live a Cash-Only Life

4. Consider Debt Consolidation

If you’re carrying balances across several credit cards, debt consolidation by banks, credit unions and lenders will combine those balances into one monthly payment with one interest rate. It’s an attractive offer that does come with some drawbacks — namely low introductory rates that last a limited time — that should be evaluated. Debt consolidation also impacts your credit score, so if you’re planning to take out a loan of any kind in 2019, carefully consider your plans for your new home, car or education loan.   

5. Transfer Your Balances

If you have a favorable credit score, you can apply for a balance transfer and move all or a portion of an outstanding balance to a low or no APR credit card to save you interest in the long run. Before you take advantage of the pitch, read the fine print and know exactly how long that attractive introductory interest offer stands and calculate how much you’ll pay in balance transfer fees. After you’ve crunched the numbers and decided to apply for a balance transfer, act fast to lock in lower interest rates before the Fed’s anticipated increases this year.

Click through to read more about the average credit card debt by age.

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