Strategies To Get Rid Of Credit Card Debt

A man adding to his credit card debt.

The worse debt that you can carry is credit card debt. With rates as high as 29 percent, it can strangle your finances and keep you from ever getting ahead. If you are carrying more than $1000 in credit card debt, you should make it a priority to get that plastic paid off. Here are some ways to do just that.

Consolidation Loans

A consolidation loan can pay off all of your credit cards at once and roll them into one loan, hopefully with a much lower overall interest rate. You can then pay off your debt much faster because you will not be burning so much money on interest.

Another perk of consolidation is that it makes paying your bills easier. Instead of paying a half a dozen or more smaller payments, you can pay just one payment.

If you decide to go for consolidation and have good credit, you have a lot of options. Websites like Marcus by Goldman Sachs, for example can make you an offer online for anywhere from $3,500 to $40,000. If approved, you can get funds sent right to your bank account with a loan rate of as little as 6.99 percent.

A rate that low is likely about a third of what you are paying now and that means two thirds less entrance. That is money that you can turn around and use to further pay down that debt.

Want a consolidation loan but have less than perfect credit, you may still have options. Websites like Loan By Numbers can get you an offer online for loans up to $25,000. If approved, you can get funds sent directly to your bank, but the loan rate is likely to be much higher.

If you pursue a loan with poor credit, make sure that the interest rate you get is low enough to actually produce savings. Make sure you consider the added costs of fees as well.

Debt Reduction Methods

If a consolidation loan is not a possibility, you should look into a method for reducing your debt. Here are two popular methods that you can consider, the Debt Snowball Method & the Debt Avalanche Method

Debt Snowball

Motivation is the cheap benefit of this method. You basically motivate yourself by starting out with small goals and then working your way up to larger ones. Here is how it works.

Take all of those credit cards and organize them based on amount owed. Now, start paying the minimum on all cards except the ones with the lowest balance. On this card, pay as much as you possibly can. Since this card has a low balance, you will likely get it paid off super fast.

Having a credit card paid off is a great feeling. That great feeling will likely encourage you to keep going with your debt reduction.

After paying off your first card, keep going by moving on to the next lowest balance. Keep doing this until your debt is gone.

Debt Avalanche

Logic is the thing that makes this method work. If you want to make the most of your money, the Debt Avalanche method is for you. Here is how it works.

Again, take all of your credit cards and organize them, this time by interest rate. Pay the minimum on all of your cards except for the one with the highest interest rate. On this card, pay as much as you possibly can. Because it has the highest interest rate, you will be paying down the debt that is costing you the most.

Paying off highest interest first will maximize your dollar and allow you to overall, pay less interest. The highest interest card is likely not going to be the lowest balance card though. This means that, with this method, you might not get that rewarding “paid off card” feeling for some time.

Once you get that first card paid off, move on to the one with the next highest interest and repeat the process.

After The Debt Is Paid

Once that debt is paid off, put away the cards and keep it off. Start paying cash and if you can not afford something, simply do without it. Hopefully, the struggle of paying off that debt has taught you a valuable lesson and you will never make the same mistake again.

Also, after paying off your debt, you need to give though to your credit score. Reducing your debt will likely cause your credit score to shop u quite a bit, but be careful. The reason that your score increases is because your credit utilization decreases and your available credit shoots up. That is great, but it also means that you need to keep those credit cards.

If you go and cancel your cards, you will decrease available credit and likely decrease your credit age. That could drop your score, so, unless those cards have an annual fee, keep them open.

Buy Used & Save Big

Used stuff that you can save on.

Everyone loves something new, but things do not remain new for very long. You buy a new car and you can claim it as “your new car” for a few months and then it becomes just “your car”. That is a nice “new shirt” but wear it again and you are wearing a “shirt”.

The point is, the value of new quickly wears off but the money that you spend on that new item lingers for a very long time. Instead of buying new, save big on the initial depreciation and buy used. Your bank account will thank you.

Yes, there are some things that you want to buy new, like clothing, but there are some things that should always be bought used. Here is our list on things that you simply must buy used.

  1. Automobiles
    This has to be number one on the list of things to buy used. A new car might be $30,000  but you can buy it used for $24,000. It might have 10,000 miles on it, but it will still have a factory warranty and be in great shape.
    In this case, take the $6,000 that you saved and put int into your retirement savings. If you buy a new vehicle every 5 years, that is 6 vehicles that you will purchase in that time which equals $36,000 in savings buy purchasing used. And, that does not even include the compound interest you would earn on that money.
  2. Books
    Okay, most people buy eBooks these days, but there are still some people who prefer holding an actual paper book in their hands. If you are one of those people, you probably also like to splurge for the hardback copy that looks nice on the bookshelf.
    Why spend $20 to $30 on a new hardback when you can go to a used bookstore and pay less than half of that price. New releases are typically half the cost of new and older titles can be a quarter of the list price.
  3. Exercise Gear
    People are fickle. They get it in their head that they want to start working out and go out and buy a bunch of gym gear. Then, they stick with it for a month, maybe two. After that, this gear becomes just another place to hang the laundry.
    Take advantage of peoples lack of motivation and save big on exercise gear. You can get very lightly used equipment for about half of what you would pay at the sporting goods store.
  4. Lumber
    Have a little home improvement project in mind? Before you run off to the big box store for lumber, check Craigslist. People tend to overbuy on construction materials or just simply change direction in the middle of a project. Score great deals on dimensional lumber, plywood and a whole lot more.
  5. Major Appliances
    Did your built in microwave go out? Chances are good that you can find an exact replacement on Craigslist for it. People are always upgrading kitchens and that leaves a plethora of major appliances on the market. Choose from dishwashers, ovens, refrigerators and washers and dryers. Many of them will be in nearly new condition and cost a third of the retail cost.
  6. Furniture
    I am never a big fan of purchasing anything with cloth used, but wood furniture is fair game. If you need a new entertainment center, hutch or a dining table, used is the way to go. Even bed room sets can be had for a fraction of new, although I would skip in the used mattress.
  7. Moving Boxes
    Yes, boxes are relatively cheap costing about $2 a piece. If you are moving though, this can get expensive quickly. You could easily spend hundreds of dollars on boxes, especially if you purchase specialty boxes like wardrobes.
    What happens when someone moves to their new location with all those boxes. They unpack and then are left with stacks of cardboard that overwhelms the recycling bin. All they want at that point is for someone to come take those boxes for free. You can be that person and can save in a huge way. Look once again to Craigslist and pick up stacks and stacks of lightly used free boxes.
  8. Recreational Trailer
    Camping trailers are just like exercise gear. People think that they are going to get one and then take the kids out every weekend camping. It is a noble goal, but one that rarely comes to fruition.
    If you are thinking about a camping trailer whether it be a bug tandem axle unit or a small pop up camper, turn to the used market first. These things lose value quickly, especially when you find a motivated seller who wants their poor decision out of the driveway.
  9. BBQ Grills
    If you have a truck or a trailer and are looking for a BBQ, take a look at used ones. These things get dirty fast and people do not want to move them, especially when moving out of state. This is where you can save big. With a truck or trailer, you can easily move these things without much mess and possible save hundreds of dollars.
  10. Video Games
    Thinking of picking up a new game for your system? If it is a new release and you are not a serious gamer, give it a few weeks.
    New titles generally go for around $60 and are quickly picked up by hardcore gamers. They play it, win the game and then move on to the next big title. This is where you swoop in and score your game for half price.