5 easy steps to eliminate credit card debt

By CreditCards.com

For many, credit card and other personal debt is a fact of life. It's not surprising: Advertisers constantly bombard consumers with buy-it-now messages. According to a survey by the consumer analyst firm, Mintel, the average debt in the UK for each man, woman and child is now £11,830. According to the Bank of England, at the end of January 2007, British borrowers owed £55 billion to credit-card issuers. If the weight of credit card debt is too heavy in your life, there are five steps to making yourself debt free. Follow this simple guide and you can begin to take charge of your financial future.

Step 1: Stop adding to the problem. If you are deeply in debt and continue spending more than you earn on your credit cards, things will only get worse. Stop using your credit cards to borrow from tomorrow what you want today.

Step 2: Write a budget. This can be a difficult exercise for those of who have used credit cards to bridge the gap between income and expenses. But tracking spending can spotlight wasteful spending that can be curtailed painlessly. Fixed expenses such as mortgage or rent, utilities, food and insurance take up the majority of most household budgets. Experts say it's important to try to allow yourself some mad money to play with every month. The difference is that instead of giving yourself carte blanche with your credit card, set aside a fixed amount of cash for luxuries.

Step 3: Use cash rather than credit. There's a reason that casinos give you chips to spend instead of cash: People don't attach the same value to noncash substitutes and will spend and bet more freely. It's the same with credit cards: Like poker chips, they have an air of unreality. So, next time you buy pair of new shoes or the latest CD, hand over the cash and feel the burn instead of swiping a credit card. It makes you think twice about impulse purchases.

Step 4: Get a better interest rate. If you have thousands in personal debt it can really improve your monthly cash flow if you transfer those balances onto a low or 0 percent interest credit card. Your credit rating will generally determine whether you're eligible for the lowest rate offers.

Step 5: Apply extra cash to your debts. Living within your income, establishing a budget and paying cash, along with better interest rates on your credit card debt should save you hundreds each month. If your belt-tightening has freed up cash, apply it toward your credit card debt. For more information on credit cards and related topics, please see our credit card news archive.

Published: 8 July 2007