4 ways to take control of your credit card debt

4 Ways to Take Control of Your Credit Card Debt

You may have gotten your first couple of credit cards and gone a little overboard. Now, you’re in a debt snowball that feels almost impossible to come back from.

The first step to solving a problem is recognizing that you have one. But here’s the good news, we’ve listed four ways to take control of your credit card debt and what to do afterward.

Don’t get us wrong, taking control of your debt can be challenging, but once achieved, it can be one of the most rewarding things you’ve ever done. Let’s git-r-done.

#1 Stop Swiping

**URGENT** Swiper, no swiping. 

Stop swiping your credit card. When you stop swiping your credit card, you stop adding to the problem. If you’re trying to take control of your credit card debt, then you must stop creating more.

It’s the hard truth, but it has to happen; say your goodbyes. Luckily, you don’t have to worry about 3 AM texts from this ex.

#2 Create a Budget

Once you’ve done the breakup, there’s still going to be some residual damage to take care of. Paying off credit card debt is hard, but you can do it if you make a plan and a budget. 

When you know your income and how much your fixed expenses cost, you can understand how much you can allocate towards paying off your debt. Check out Budgeting 101 to figure out how to use your money wisely.

#3 Pay Off The Debt

There are usually two routes you can take on the road to becoming debt-free, each with its pros and cons. 

Route 1: One card at a time. On this path, you’ll be hitting one speed bump at a time, but once you overcome the hump, it’s smooth sailing until the next one.

Route 2: Divide and conquer. On this path, the entire journey is a bit rocky, but there’s no slowing down. It’s about drive, it’s about power.

You can usually determine for yourself which route would best fit your financial situation and style of money management. At the end of the day, you’ll end up in the same place: debt-free paradise. 

Let’s get into the deets. Here’s a scenario for you to consider when thinking about how the two routes would look in real life: 

You have three credit cards and $100 to use to pay off your debts.

Credit card 1: you owe $50

Credit card 2: you owe $100

Credit card 3: you owe $150

One Card At a Time

With the one card at a time method, here’s how your $100 will gets used:

Credit card 1: $50 - $50 = $0. Woohoo, you’ve wiped out a whole credit card’s worth of debt.

Credit card 2: $100 - $50 = $50. You’ve paid half of your debt on this card.

Credit card 3: $150 - $0 = $150. You’re still in the same place with this card.

Focusing on paying one card at a time is a great way to approach your debt. It’s best to focus on your smaller debts at first and then tackle the larger ones.

The idea behind the one card at a time method is to put all of your efforts (or money) towards one sum of debt. When you finally pay off the one debt in full, it makes one less thing to worry about; this is card debt consolidation. Unlike heads, one debt is better than two.

By paying off one card at a time and consolidating your credit card debt, you can avoid high interest rates and the complications that come with any outstanding debts.

Divide and Conquer

With the divide and conquer method, here’s how your $100 could be used:

Credit card 1: $50 - $20 = $30.

Credit card 2: $100 - $30 = $70.

Credit card 3: $150 - $50 = $100.

The conquer and divide method is when you pay off a small amount of debt on all of your cards until you’re completely debt-free. 

Despite still having debt on all of your cards, it’s not as much debt. Having $100 left on credit card 3 may be less daunting than its original $150, and chipping away at each debt can make you feel more satisfied. 

It’s best to put the most money towards your card with the greatest balance or highest interest rate.

When you boil it down, no matter what method you prefer, you’re still getting rid of credit card debt. Once you make a plan, try to stick to it. Having a clear vision of your future finances can make the difference between getting there or not.

#4 Use a Timeline

Whether you’re using the one card at a time or the conquer and divide method, a timeline can give you some peace of mind.

Creating a timeline is simple if you use your budget to plan out how much money you can put towards your debts each week or month. A timeline can give you a rough idea of when you should have all your debts paid. 

When you have a date in mind of when you’ll be officially debt-free, it can make sticking to your resolution that much easier.

What To Do Once You’ve Cleared Your Debt

Finalize your breakup with debt, and start a new relationship with your accounts. You may want to close your accounts to avoid temptation, but this isn’t always the best decision. There are pros to both keeping and closing your accounts for you to consider.

Pros To Keeping Your Accounts Open

  • Having a card that’s open for several years lengthens your credit history, which is good for your credit score.
  • Continued access to a line of credit is helpful for emergencies.
  • An open, $0 balance card might keep your credit utilization low, which helps your credit score.

Pros To Closing Your Accounts

  • Without the account, you can avoid the temptation to overspend.
  • You won’t have to pay banking fees that come with the account.
  • One less account is one less thing you’ll have to keep an eye on when managing your finances.

If you decide to cancel your account, there are two things you should double-check before you do so that all your hard work doesn’t go to waste. Make sure to:

#1 Doublecheck your accounts’ balances

Your credit utilization (which affects your credit score heavily) is based on all of your cards, so this note is super important. Check this out:

Credit card 1: has a $50 limit and a $50 balance.

Credit card 2: has a $50 limit and a $0 balance.

Your credit utilization combined: is 50%. ($50 total balances / $100 in total limits = 50% utilization)

Close credit card 2, and your credit utilization would jump to 100% ($50 total balances / $50 total limits = 100% utilization). You can see how ignoring this fact would hurt real bad, especially if you’re using the one card at a time method.

We’re super proud of you for getting your balance down to $0, but be patient on closing your account until all of your balances are at $0. Be super duper sure that your debts are clear by requesting written confirmation from your card issuer.

#2 Use Your Rewards

Don’t let the cashback and rewards you’ve earned go to waste! Use it alllll up. If all goes impeccably well, your cashback can pay off your final bill or even speed up your projected timeline.

As a reward for paying off your debt and as a farewell gift from the credit card company, feel free to pick out a gift with your points.

Remember that you’ve given the company business and that rewards are your rewards!

You’re Ready!

Now, you can close all of your accounts! You did it, you’ve taken control of your credit card debt, and we’re so proud of you.

Once you’ve received your written confirmation and closed your accounts, check out that bad boy of a credit score. About 30 to 45 days after you’ve closed your accounts, your three credit scores should reflect your hard work.

Continue to keep away from credit cards and instead be financially responsible with a debit card. Our Extra card has some benefits that you’d never expect to find in a debit card. Building a stellar credit history can continue even after you’ve removed credit cards from your life.

Now that you know the way, be a good friend to your peers and tell them what you found to be the best way to pay off credit card debt. 


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