In this post, we will review 5 simple steps to get out of credit card debt, but first, here is our disclosure.
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Credit Card Debt, A Now a Trillion Dollar Problem
America has a major problem with debt. I am talking about a colossal problem with debt. According to the government’s website, FiscalData, the US National Debt is almost $31 trillion and growing, while our national GDP is around $23 trillion. That means the US government owes $8 trillion more in debt than the total GDP of the United States. That works out to a debt to GDP of 124%.
Unfortunately, many individuals and families find themselves in the same position, struggling with debt. To make matters worse, debt has become normalized in our society. Nowhere is this more evident than with credit card debt.
According to the Federal Reserve Bank of New York, in the first quarter of 2023, Americans’ total credit card debt was $986 billion. Put another way, as a nation, Americans are now over the $1 trillion mark in credit card debt alone. This staggering amount does not even account for the trillions of dollars owed in student loans, auto loans, HELOCs, mortgages, and other forms of debt.
It is time to Get Fed up and Act
Thanks to the marketing efforts of profit-driven banks and credit card companies, many people have been sold the idea that debt is necessary to achieve their financial goals. It’s no wonder that Visa, Mastercard, American Express, and Discover have a market cap exceeding $1 trillion when so many individuals are grappling with credit card debt closing in on the same figure.
The sheer magnitude of all of these numbers is both astounding and scary. It would make for a truly terrifying plot in a horror movie. I wouldn’t have the nerve to watch it without covering my eyes in terror. However, you need to be more than just scared. You need to get fed up and ticked off by the institutions and companies that profit from your financial situation. You need to use this as motivation to kick this bad habit to the curb.
It’s common for individuals to end up in difficult situations that result in debt. I am here to tell you that you are not powerless. You do have the strength to get out of credit card debt. It is not easy. Getting out of credit card debt may require sacrifices, examining your spending habits, and seeking ways to increase your income. Don’t let that stop you from even trying. Believe in yourself, focus, and put your energy behind it.
The key to getting out of debt is to take that first step and take action. I have compiled a list of steps to help you get out of credit card debt. You will soon discover that many do not even have to do with money. Instead, so much of getting out of debt is about having the right attitude and mindset, and the very first step is to face your problem.
1. Admit You Have a Problem
To overcome credit card debt, it’s important to acknowledge that you have a problem. Admitting you have a problem is not a sign of weakness or hopelessness. Let’s face it. It is much easier to blame others and put your head in the sand than confront your issues. It takes so much more strength and courage to admit you have a problem. I believe there is nothing more powerful and courageous.
Without a doubt, it is hard and difficult to face your problems, but nothing good in life comes easy. Therefore, admitting there is a problem is the first step toward finding a solution. Doing so allows you to take control of the situation and work toward a resolution. So be strong and brave and face your credit card debt head-on.
2. Take Responsibility
While acknowledging that you have a problem with credit card debt is the first step toward finding a solution, remember that making excuses for the problem won’t help you move forward. Instead, it can keep you stuck with credit card debt. You need to leave the excuses and blame behind and take responsibility for your credit card debt.
Sometimes, life can be tough and expensive, and finding yourself in debt is easy. No matter how you got into significant credit card debt, it is time to take responsibility for it. Blaming credit card companies, banks, or misfortune won’t help you get out of debt. It’s important to take responsibility for your actions in order to make meaningful changes. Only then can you take effective steps toward getting yourself out of credit card debt.
3. Analyze Your Spending
No matter the reason, there is only one way you get into credit card debt: by spending more than you have. Therefore, you need to take a closer look at your spending habits. You may be surprised to discover how many unnecessary and frivolous purchases you are making.
In the past, people had to physically go to a store to buy something, which made it harder to give in to impulse purchases. Nowadays, with online shopping just a click away, it’s easy to buy things that we hardly use or need. I have fallen into this trap before and still do occasionally. However, every penny saved from avoiding unnecessary purchases can be put towards paying off credit card debt.
Take control by reviewing your credit card statements and spending. You can use a good old-fashioned spreadsheet to track and analyze your spending or use a budgeting app like Mint or YNAB. No matter which route you decide to take, the key to getting out of credit card debt, or any debt at all, is to start by analyzing and tracking your spending. It may not be the most enjoyable task, but it is essential.
Remember, it’s easy to get caught up in impulsive online purchases. While unexpected expenses can happen, don’t let them become the norm. Analyze your spending, create that budget, and take control of your credit card debt. You can do this!
4. Get Laser Focused
You must be all in if you want to get out of credit card debt. There is no halfway. You are either going to do it, or you are not. Therefore, you need to get laser-focused. You need to put all your energy and effort into paying off your credit card debt.
This means cutting back on eating out. Say goodbye to expensive cuts of meat or cheese at the grocery store. Instead of buying lunch at work, you bring peanut butter and jelly or a turkey sandwich every day. You get the point.
What are you doing with all the money you are saving?
You are taking all the money you save and putting it toward paying off your credit card bills. You have one singular goal: to destroy your high-interest credit card debt. Trust me. You will be amazed at what you can accomplish if you put all your energy and focus behind it. It might seem extreme, but I have been there and done that.
In my early twenties, I found myself with over $2,000 in credit card debt. That is when I got serious about debt. I decided to pay off that credit card and never have a monthly credit card balance again. I got laser-focused and put any money I could into paying off my credit cards, including my tax refund.
Years later, I have never carried a monthly credit card balance, and I have also consumed countless peanut butter and jelly sandwiches. The takeaway here is that I got laser-focused and paid off my credit card debt, and you can, too.
5. Make a Plan
Once you commit to paying off your credit card debt, it’s time to make a plan. It is important to establish a specific strategy that outlines how much money will be allocated towards debt repayment each month, which debts will be prioritized, and how long it will take to pay them off. By having a well-defined plan, you can stay motivated and focused on the end goal while also avoiding unnecessary expenses that could derail your progress.
You may choose to tackle your credit card debt from the smallest to the largest dollar amount or vice versa. Alternatively, you may prioritize paying off the debt with the highest interest rate first. The most important thing is to choose a method that will keep you motivated throughout the process. This is why I like using SMART goals. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-Bond.
SMART Goal Credit Card Debt Example
Let’s say you make $50,000 a year and have $7,500 in credit card debt spread across four credit cards. The balances on the cards are $500, $1,000, $2,000, and $4,000. You can create a SMART goal to get out of credit card debt in 18 months while refraining from using your credit cards during that period.
You will accomplish this by allocating 10%, or $500, of your income each month to paying off your credit card debt from smallest to largest. While putting most of the $500 toward the first card, you will be paying the minimum on the other three cards. Once you pay off the first card, you will move on to the second, and so on. If you start this plan on January 1st, you can set time-bound goals to have your first card paid off in February, the second in May, the third in October, and the fourth in June of the following year.
Now imagine attempting to escape credit card debt without a well-defined plan with specific goals. Would you embark on a road trip without a navigation app or a map? In both cases, you will wander aimlessly and eventually become exhausted, having seen little progress from your efforts.
By implementing SMART goals, you are taking control of your progress and ensuring that you are moving in the right direction. This strategy allows you to make any necessary adjustments along the way, keeping you on track to achieve your goal. While getting out of credit card debt may require some short-term sacrifices, having a plan and SMART goals will keep you motivated. You will know this is only a temporary situation that will lead to long-term success.
Bonus Steps On Credit Card Debt
I am trying my hardest to keep this list to five actionable steps. It is a challenge, considering that people have written books on getting out of debt with entire chapters addressing credit card debt. However, I want to touch on a couple of other things you need to consider when getting out and staying out of credit card debt, starting with credit card rewards.
Credit Card Rewards
Chasing credit card rewards is a surefire way to go into credit card debt, particularly if you are unable to pay off your credit cards in full each month. While they can certainly offer enticing perks and benefits, such as cashback, points, or travel rewards, they can also lead to overspending if you’re not careful. Even if you make a point to pay off your credit card balance in full every month, the lure of rewards can make it tempting to spend more than you normally would.
You may believe you are gaming the system or reaping the benefits of credit card rewards. However, are the rewards that come with those purchases worth it? After all, does it matter you are receiving 2% cash back when you are charged over 20% APR on any outstanding balances you hold?
I think it is safe to say it is highly unlikely that anyone has ever accumulated wealth by paying a 20% interest rate in exchange for receiving a mere 2% cashback.
Get Out and Stay Out of Credit Card Debt
Once you get out of credit card debt, stay out of credit card debt. One way to accomplish this is by identifying and avoiding the behaviors that led to the accumulation of debt in the first place. This may involve creating a budget, limiting unnecessary expenses, and practicing self-discipline when it comes to spending.
Above all else, you need to avoid falling back into credit card debt. You worked so hard to get out of credit card debt; keeping up the effort is important. As you see your debt disappear and your savings grow, you will have the motivation and the positive reinforcement to stay out of credit card debt.
Ready. Set. Go!
I sincerely hope that these steps prove helpful and encourage you to take on your credit card debt. Although it’s not an easy task and requires significant effort, the reward is definitely worth it.
Remember, you have the strength to face your credit card debt head-on, and with a well-planned approach, you can successfully say goodbye to your debt. You are taking a giant step toward financial freedom with each debt that you pay off.
So take your mark. Get ready. Set. Go!
