The average American has about $5,525 on their credit card, with the average interest rate credit card of 15.91%. With typical payout guidelines (minimum payout amount of 3% or $10), it would take more than 15 years to pay off that debt, and it would earn even more interest along the way.
Paying isn’t particularly easy either. Median U.S. household wins $67,521 a year, and after paying rent or mortgage, covering utilities and buying food, there’s not much left. That extra credit card bill has a huge impact on someone’s finances.
With that in mind, here are six tactics to help you manage your credit card debt:
1. Lock your credit cards
You can use an actual lock or just allow it to be a metaphorical lock, but either way the basic strategy is the same:
Stop using your credit cards for a year.
Instead, aim to live on just your debit card and the cash you have. Why do this? It will absolutely force you to live within your means. You will learn how to deal with small financial emergencies without relying solely on a credit card. Avoiding credit cards ensures that your credit card balances will only decrease – as long as you don’t increase the balance.
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2. Negotiate, negotiate, negotiate
Once you agree not to use these cards, you are free to negotiate with the credit card companies. The main risk of dealing with credit card companies is that they reduce your credit limit or cancel your card. But if you do not use cards, this risk disappears. So you can negotiate freely and use a number of tactics to lower your credit card interest rates.
Simply call the issuer of each of your cards and ask about an interest rate reduction and, if you have a free balance, the availability of interest-free balance transfers. Your goal is to lower your interest rates on all your cards as much as possible, by reducing the amount you pay each month in pure interest.
It’s also a good idea to consider getting a new credit card with a 0% interest balance transfer offer available. This doesn’t mean you start using credit cards for purchases; you do this to reduce interest rates. If you get such a balance transfer card, transfer your highest interest balance to this offer.
3. Create a debt repayment plan
Once you’ve lowered all of your interest rates as much as possible, it’s time to set up a repayment plan. Take all of your current balances and interest rates and list them, with the highest interest rate at the top. If you have a card that has a time-limited introductory rate, don’t count that introductory rate – count the rate you’ll be charged when that rate expires.
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Next, figure out how much you can spend in total each month to eliminate those cards. It must be greater than the total minimum payout on all your cards. You can always add more during the months when you have a little extra money to speed up debt repayment, but you want a firm amount dedicated to it. This will help you budget and automate payments if desired.
Each month, make the minimum payment on each of these credit cards, then make the highest possible additional payment on the card with the highest interest rate. When you pay off that highest interest card, cross it off your list and move on to the next one.
Do not reduce the amount you have committed each month to debt repayment. Instead, each month just make an extra, larger payment on your card with the higher interest rate. This additional payment will increase over time and your repayment speed will increase.
4. Clean out your cupboards
There’s almost no better time to clean out your closets and sell unwanted items than at the start of a debt repayment plan. You can turn these into cash, then apply them directly to a big extra payment on your highest-interest debt.
To do this, try tackling your overcrowded closets, shelves, and cabinets with a good decluttering strategy, like the KonMari method. Just browse through the contents of each of these spaces and ask yourself which elements really spark joy for you and which do not. If an item doesn’t excite you at all or isn’t an essential tool, sell it.
5. Reset some of your habits
Many people have a negative view of this process because they contemplate losing their most important things.
Instead of assuming the worst, look for spending habits that have little impact on you and change them. Take your electricity bill, for example. Try doing little things around the house that use less energy in ways you can’t see, like using LED bulbs and a programmable thermostat.
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Go through old credit card statements and ask yourself what expenses still seem valid to you. Aim to completely remove only those that no longer seem valid. These changes alone will result in substantial savings with minimal life impact.
6. Focus on smaller, lasting changes
Making big changes is great in the short term, but the changes end up being unsustainable – dragging you back to where you started.
Instead, focus on smaller, lasting changes. Try a few strategies from the previous tip and stick with the ones that feel like you can apply them for the rest of your life. If the changes rub you the wrong way, abandon them without hesitation; they wouldn’t last anyway, and there would likely be an expense backlash if you forced yourself to stick with them until you hit breaking point.
It’s these small, lasting changes that will make it easy to stick to the plan, get your cards paid off, and then move on to even bigger financial goals.
[This article was first published on The Simple Dollar in 2020. It was updated in March 2022.]