Credit card debt sucks. It really does. It feels like being shackled; the money has long been spent, and all you have left is a balance that is now a constant in your life. Credit card debt is not uncommon, and Americans have almost four trillion dollars in credit card debt combined! The good news is, now you know better...right?
The even better news is that you can learn how to lower credit card debt. And if you commit to being debt-free and maintain the right mindset, you can totally get rid of those awful debt shackles! Are you wondering how? Keep reading!
How to reduce credit card debt
Below are 10 quick tips to help you learn how to reduce credit card debt. Let's get you started becoming debt-free!
1. Develop the right money mindset
Your mindset is your thought process and the way you think about things. Having a positive money mindset when it comes to paying off your debt is really important because you empower yourself and tell yourself that you can get rid of it. Studies even show there is power in positive thinking. Paying off debt can take time and so you want to make sure you are mentally prepared. Tell yourself things like “I can do this,” "Being debt-free is worth it," and “Goodbye debt.” Not only should you tell yourself these things, but you need to believe them as well.
2. Stop spending money on your credit card
The time to reduce credit card debt and end the revolving cycle of debt is now, and that means no more spending on credit. It's not possible to pay off debt or build wealth by racking up more debt. It's like trying to fill up a hole but there's an automatic shovel digging out everything you put in. Cut up those cards or put them in the freezer. No more charges on them!
3. Reduce the number of credit cards you own
A key tip on how to lower credit card debt is to reduce the number of credit cards you have. You don’t need 5-10 credit cards that are tempting you to spend money you don’t have. Everyone is different, but it is advised that it is best to stay between 1-3 credit cards. Credit cards can be useful when used correctly. As long as you can curb your spending, the thinking behind three is you carry two cards and leave one in a safe place at home. However, you should have a rainy day fund so you don't have to rely on your credit card if an emergency pops up.
4. Tally it all up and determine how much debt you owe
A big step on how to reduce credit card debt is to determine how much you owe, to whom, and the associated interest rates. I'm going, to be honest, and tell you that you can’t bypass this process. It's essential to figure out how much debt you have in total in order to create a plan of attack. And if that means breaking out your favorite glass of wine, playing some Beyonce, or calling up your bestie to get it done, then do it!
5. Get radical about paying off your debt
Create a plan of action to destroy your debt, and part of this plan should include sticking to a strict budget. First, decide what budgeting method will work best for you, then you can create your budget with this method. You can decide to snowball your debt by creating a plan to reduce your credit card debt with the highest interest rates first to save you the most money. Alternatively, you can pay down the debt with the smallest balances first if you thrive on big wins. The goal here is to pay off as much as you can, more than the minimum required on the highest or smallest debt until it is completely paid off. Once this is done, move on to the next card you need to pay off.
6. Create a $1,000 emergency fund
It's really important to have an emergency buffer while you reduce credit card debt. This way if something happens, you can use this cash instead of going back to your credit cards. Plan to contribute to your emergency fund a little bit at a time, e.g., $100 a paycheck. Also, consider opening dedicated savings account like a Christmas Club Account for your emergency fund. This will help you to avoid accessing the funds until necessary.
7. Create a financial plan; be patient and consistent
Get a financial plan in place to set goals, reduce credit card debt, save, invest, and create a good life for your future self. A financial plan is a great way to figure out how to reduce credit card debt and help you to stay focused and stay aggressive in becoming debt-free. Give yourself time to make progress and achieve the results you want. You might only be making little progress at the start, but it's all worth it.
8. Consolidate your debt
Sometimes it’s best to reduce your credit card debt by consolidating your debt into a lower interest rate loan. You can save a bundle of money in interest if you are able to consolidate into a lower rate. It is very important, however, that when it comes to consolidation you understand the fees and rules. You also need to ensure that you are actually saving money on interest payments. You also still need to learn how to manage your finances and prevent yourself from racking up more debt.
9. Find accountability partners
Getting an accountability partner is one way to ensure you don't slack on your new responsibility of achieving your short-term, mid-term, and long-term goals. Their job is to assist you along your journey, motivate you, keep you grounded and focused, and help you prioritize your goals.
10. Learn to live below your means
You can reduce your credit card debt, but you still need to learn to live below your means to prevent you from getting right back into debt. It’s like the saying about the spider and the web; you can clean up the web a thousand times, but you have to kill the spider to prevent it from remaking the web. By becoming a savvy shopper, living frugally, and not impulse buying, you can get out of debt. This in turn will help you set yourself up to be financially successful in the future too.
Keep in mind that YOU have to decide how badly you want financial freedom, and if you are willing to do what it takes to get there. Paying off debt is not easy. Especially after the novelty of spending the money has worn off. However, it is totally doable with dedication, discipline, focus, and time. You can do it!