6 Tactics for Handling Piles of Credit Card Debt

The average American has about a $6,200 balance on their credit card, with the average credit card carrying an interest rate of 14.52%. With typical payoff guidelines (3% or $10 minimum payment amount), it would take 21 years to pay off that debt and it would accrue even more interest along the way.

Paying it off isn’t particularly easy, either. The median American household income earns just above $60,000 a year, and after paying the rent or mortgage, covering the utilities and buying food, there’s not a lot left over. That extra credit card bill has a huge impact on someone’s finances.

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    At our lowest financial point, my family had well over $15,000 in credit card debt, with additional student loans and car loans. The debt was spread across six credit cards, many of which were maxed out. We had reached a point where, when a card was maxed out, we just applied for a new one. However, we were able to tighten our belts and eliminate our piles of credit card debt together.

    6 ways to tackle credit card debt

    1. Lock up your cards

    You could use an actual lock or simply allow this to be a metaphorical lock, but in either case, the core strategy is the same: stop using your credit cards for a year. Instead, aim to live solely using your debit card and cash that you have — not your credit cards.

    Why do this? It will absolutely force you to live within your means. You’ll learn how to deal with small financial emergencies without just relying on a credit card. Avoiding credit cards ensures that your credit card balances will only decrease — as long as you are not adding to the balance. 

    2. Negotiate, negotiate, negotiate

    Once you’ve committed to not using those cards, you’re free to negotiate with the credit card companies. The main risk in negotiating with credit card companies is the risk that they may reduce your credit limit or cancel your card, but if you’re not using cards, that risk disappears. Thus, you can negotiate freely and use a number of tactics to reduce your credit card interest rates.

    [ More: How to Lower Your Credit Card Interest Rate ]

    Simply call the issuer of each of your cards and ask about an interest rate reduction and, if you have some balance free, the availability of zero interest balance transfers. Your goal is to lower your interest rates on all of your cards as much as you can, reducing the amount you’re paying each month in pure interest.

    It’s also a good idea to look into potentially getting a new credit card with a 0% interest balance transfer offer available. This doesn’t mean that you start using credit cards for purchases; you’re doing this just to reduce interest rates. If you get such a balance transfer, move your highest interest balance to that offer.

    3. Create a debt repayment plan

    Once you’ve minimized all of your interest rates as much as you can, it’s time to make a repayment plan. Take all of your current balances and interest rates and make a list of them, with the highest interest rate at the top. If you have a card that has a limited time introductory rate, don’t count that introductory rate — count the rate you’ll be charged when that rate expires.

    Then, figure out how much you can devote in total each month to eliminating those cards. It needs to be higher than the total minimum payment on all of your cards. You can always add more to it during months when you have some extra money to accelerate debt repayment, but you want a firm amount you’re devoting to this so you can budget around it and automate payments if you wish.

    [ Read: Best Debt Consolidation Loans of 2020 ]

    Each month, make the minimum payment on each of those credit cards, then make the largest extra payment you can on the debt with the highest interest rate. When you pay off that highest interest card, cross it off your list and keep going with the next one. Don’t reduce the amount you have committed each month to debt repayment. Instead, each month, simply make a bigger extra payment to your card with the highest interest rate. That extra payment will grow over time, and your repayment speed will get faster.

    4. Clean out your closets

    There’s almost no better time to clean out your closets and sell off unwanted items than at the start of a debt repayment plan. You can turn a bunch of unwanted stuff into cash, then directly apply that to an additional big payment on your highest interest debt, potentially knocking it completely out right off the bat.

    [ Related: How to Create Your Own Debt Repayment Plan ]

    For this, try tackling your closets and shelves and overstuffed cabinets with a good uncluttering strategy, like the KonMari method. Simply go through the contents of each of those spaces and ask yourself which items really spark joy for you and which ones do not. If an item doesn’t really excite you in any way or isn’t an essential tool, sell it off.

    5. Reset some of your habits

    Many people have a negative mental picture of what changing their spending habits looks like. This is usually because they immediately consider the spending routines that are truly the most important to them and think about how miserable it would be to change that routine. That’s actually the worst possible approach to take — the changes that would make you miserable are the ones you shouldn’t make.

    Rather, look for spending habits that have little impact on you and change those. Do you care about your electric bill? Then try to do little things around the house that consume less energy in ways that are invisible to you, like using LED light bulbs everywhere and using a programmable thermostat to keep your AC or furnace from running. Buy store brand versions of lots of household supplies — it doesn’t make a quality of life difference as to which trash bag or dishwashing soap you use as long as it does the job. 

    Go through old credit card statements and ask yourself which expenses still seem worth it to you and aim to only really cut back on the ones that no longer seem worthwhile. Those changes alone will result in substantial savings with minimal life impact.

    6. Focus on making smaller, sustainable changes

    When people make changes to their life, there’s a tendency to make difficult large-scale changes that are simply hard to sustain. Those are great in the short term, but they end up failing and taking you right back to where you started. 

    [ Read more: The Best Savings Accounts of 2020 ]

    Instead, focus on smaller, sustainable changes. Try out some strategies from the previous tip and just stick with the ones that seem like you could just permanently do them for the rest of your life. If the changes rub you the wrong way, drop them without a second thought — they wouldn’t last anyway, and there would likely be a spending spree backlash if you forced yourself to stick with them until you reached the breaking point.

    It’s those smaller sustainable changes that will make it easy to stick with the plan, get your cards paid off, and then move on to even bigger financial changes, like saving for a down payment, buying a car with cash, or saving for retirement.

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    Trent Hamm

    Founder & Columnist

    Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to Interest.com, PersonalLoans.org, and elsewhere.