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Practical Guide: 6 Steps to Paying Off Your Credit Cards

May 21, 2009

According to, the average American household credit card debt is surveyed to be at $8,329. Even if you are not one of the average ones you probably know the devastating affects debt can have on you and your family.

If you are burdened by credit card debt and are serious about breaking free from the bondage that credit cards can put you under, then let me offer some practical steps to begin your journey.

1. Pray

Prayer is an essential component for any aspect of our lives. If you are in over your head in credit card debt, might I suggest humbling yourself and spending some quiet time alone with God to be honest with him about where you are at financially. He’s not going to be shocked by the news and He offers wisdom to those who ask for it (James 1:5).

2. Take Inventory

Gather each credit card statement and write down the name of the card, the balance, interest rate, minimum payment due and the amount you are currently paying toward that debt. I would also suggest you write down the toll free number of the card company as this will come in handy later.

Taking inventory also means you look carefully at each card companies offers (i.e. balance transfer rates, 0% offers etc.) This will be important in step four.

If you are married this should be done with your spouse. You would be amazed at how many couples I come across that do not know that the other one has credit card debt or are unaware at how bad the problem is. Typically one spouse is more of a spender than the other and so it can be quite a shock at first, but paying off debt is a team sport and must be fought together.

3. Stop Over-Spending

This sounds pretty basic, but if you are in credit card debt you have been spending more than you earn. You must be tenacious in reducing expenses and stopping your use of credit cards in order to fight this battle. Christian Personal Finance has a great post on where and how to cut expenses.

4. Negotiate With the Card Company

I am amazed at how often this is overlooked. Many companies are willing to work with you if you approach them and let them know that you are wanting to pay off your debt, especially in this economy, where many people are not paying their bills or even filing for bankruptcy.

I suggest calling your card company and be honest with them. I would ask for a manager right away or an account closing specialist so that you get straight to the decision maker that can help you. Let them know you want to pay down the debt and you’d like to know if they can reduce the interest rate for you. Find out if they have any special balance transfer rates and that you may be willing to consolidate some of the debt to them if they can give you a decent offer. Also let them know that you are willing to transfer their balance to another company if they cannot work with you. Here is a helpful post about negotiating with credit card companies.

5. Consolidate

If possible, take advantage of special balance transfers offers. This only works if you stop your over-spending. You don’t want to consolidate your debt and then rack up another couple thousand dollars on the card you just transferred. You don’t want to get into the habit of doing this either because it can have some negative impacts on your credit score, however, if you consolidate some of the debt to a much lower interest rate then more of your payment will go towards paying off the principal.

6. Snowball the Debt

Some people believe you should pay off your highest interst card first. I tend to disagree. I think snowballing your debt is more of a confidence builder and can start the momentum towards getting you out of debt. According to Dave Ramsey the best way to knock out debt is to get some quick wins under your belt.

” The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.”

The first step in snowballing your debt is to pay minimum payments on all your credit cards except the one with the lowest balance. You pay as much as you can on that amount until that debt is gone and then you take whatever that payment was and apply that towards the next smallest balance. Each time you pay off a debt, apply that payment to the next smallest card and before you know it you will have created some great momentum and will see the progression at a more rapid pace.

Final Thoughts

Getting out of credit card debt is not easy and it won’t happen over night. It will take discipline, sacrifice and patience, but the results will be worthwhile. Find some friends to keep you accountable and do your best to keep plugging away. You’ll be glad you did.

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