7 Steps to Reduce Your Credit Debt

There are millions of Americans out there who have paid off heavy credit card debt, and now it's your turn to learn how. It won't be enough, however, to just make minimum monthly payments. Here are seven steps you can take to get your debt under control.

Build an Emergency Fund.
We are trying to pay off our debt and what happens? We need new brakes on the car, we have to take the dog to the Vet because he got bit by a snake, or the plumbing backs up.

Where are we going to get the extra $200 or more to pay the bills above? Of course the Credit Card at 20% or more in interest.

You need to build up $800 to $1200 in an emergency fund so when Mr. Murphy shows up (you know the guy the one who made the Law “what can go wrong will”) you have the cash on hand to take care of the problem.

Ok now you are saying if I could save that kind of money why couldn’t I just use it to pay off my debt? You could but then Mr. Murphy would show up and you would be right back in debt.

The next question is how do I save that kind of money when I am struggling now to pay my monthly bills? That is the bad thing about the Credit Trap it is so easy to get into but 10 times harder to get out of (just look at the sub-prime mess we are in now).

Here is a list of thing you can do to earn extra money.
- Get a part time job – 15 hours a week could mean $78 or more a week to apply to your emergency fund.
- Have a yard sale – how much stuff do we all have around the house that we could get rid of that we would not even miss?
- Skip 1 week of Pizza night a month – this would probably save you $30 a month.
- Take your lunch to work instead of eating out every day – this would probably save you at least $40 a month.
That was just 4 things but the monthly total is at $382 saved not counting the yard sale so in 10 weeks you could have your Emergency Fund up and running. Then you could be on your way to being Debt Free!

Also keep in mind that when you have to use the money from your emergency fund that you build it back up as quickly as possible.
Stop using your cards.
The last thing you want to do with heavy credit card debt is add to it. Take all your credit cards out of your wallet or purse, and leave them at home (though you may want to keep one for emergencies and, no a really great sale or a cool new DVD player does not qualify as an emergency).

Cut up the cards if that's what it takes to stop using them. Some people keep their cards out of reach by locking them in a safe deposit box or freeze them in ice cube trays. You have to decide what works for you.
Stop the flood of credit card offers.
You can force credit bureaus to stop selling your name and address. Dial 1-888-5-OPTOUT or 1-888-567-8688 to get the forms. If you're searching for a low interest card, don't wait for it to come to you. Visit a site like http://cardweb.com/ or http://www.creditorweb.com/ to do your own research.
Plan your attack.
Don't just throw yourself at a mountain of debt without preparation. How many cards do you have? Which have the highest balances? What interest rates do they charge? Write down your balances for each card, and their interest rates. Use our Credit Card Calculator to help in your planning.

Some people say start by paying off the card with the highest interest rates first, and then the next highest, and so on. Others say get a quick boost, go ahead and pay off the card with a lowest balance, just to have one paid-off card under your belt.

I vote for the small to large payment schedule that way you can celebrate the small victories more often.

Once you get the first card paid off take the total you were paying on it and apply it to the next card, that way you will be starting the debt free landslide.
Always pay more than the minimum.
The credit card companies are not just being nice when they require only a small minimum payment on your total balance. They calculate this minimum to extend your payments for as long as possible, to boost their profits.

$5000 at 21% paying $88 a month will take over 24 years to pay off and total over $26000 that’s over $21000 in interest you will have paid and heaven forbid if you were ever late with a payment and got hit with additional financial charges!
- $5000 at 21% paying $100 a month will take 10 years to pay off and total $12000
- $5000 at 21% paying $135 a month will take 5 years to pay off and total $8116
- $5000 at 21% paying $188 a month will take 3 years to pay off and total $6782
Reduce the interest rate.
Most credit cards charge anywhere from 16% to 20% or more, which is huge! But you can negotiate with your credit card company for a lower rate. Particularly if you've had any of your cards for a while, take advantage of being a faithful customer, and call them up to demand a lower rate. Shoot for 11% or 12%. You'd be surprised at how easy it is.
Consolidate your debts.
OK, so you know what the interest rates and outstanding balances are for each of your cards, and you've reduced the rate on at least some of them. Next, consider combining your debts onto one or two of your lowest rate cards, if you've got some credit room on them. (If you're maxed out on those cards, then forget it.)

Simply call your lender and ask how to transfer funds. If you're making payments well above the minimum, have reduced the interest rates on your cards, and have consolidated your debt, then you're in good shape with your credit card debt.

Make sure you read the fine print some of these cards charge a low rate the first 6 months then jack it up and prorate it back to the start on any unpaid balance.

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