Five Steps to Eliminating Credit Card Debt

In April 2009, President Obama reported that 78 percent of American families held at least one credit card, and 44 percent of them carried a balance on it. Of those who had credit card debt, the average balance was $7,300. If you're struggling with such debt, several steps and strategies can help you to start eliminating the debt to free up your finances.

Stop Using Your Cards

When you're trying to pay down your credit card debt, don't continue to add to the problem. Only use your credit cards in emergencies. To reduce the temptation of using your credit cards, take them out of your wallet. Some people may find it helpful to place the cards in a container full of water and freeze it, or they may hand them to a trusted family member or friend.

Get a Better Rate

If you have a relatively good credit score, you may be eligible to apply for a new credit card. If possible, open a new account that has a low to no interest rate on balance transfers. Transfer your other credit card debt to this new card. The low interest rate generally only lasts for six months to a year, but it can buy you time while you pay down your principal instead of paying down the interest. In the long run, this can drastically cut your credit card debt. If you can't apply for a new credit card, simply calling the credit card company and asking for a lower interest rate might net you considerable savings over the months to help you pay down your debt faster.

Cut Your Expenses

Many people underestimate how much money they can save, and thus how much money they have available to pay down their debt. The longer it takes to pay down your debt, the more the interest will pile up and the more you'll pay in the end. In a 2006 article in "Kiplinger" financial magazine, financial consultant Howard Dvorkin said most people have 15 to 20 percent of "fat" on their budget they can cut and use for debt repayment. Reduce all discretionary spending as much as possible.

Strategize Your Repayment

Eliminating your credit card debt isn't only about paying down your cards, but doing so in a way that maximizes your return and eliminates the debt the quickest. Financial adviser Suze Orman, in a January 2009 article on Oprah website, recommends lining up your cards from the highest interest rates to the lowest interest rates. If possible, pay the minimum payment on each card to avoid excess fees and interest. Then, focus on paying off the card with the highest interest rate. Once that's paid off, work your way to the card with the next highest interest rate.

Negotiate a Settlement

Sometimes the credit card debt can be too overwhelming for someone to handle. If that's the case, a debt settlement may help, according to a September 2010 report in "Smart Money" magazine. If your credit card company offers you a settlement opportunity, the magazine suggests working with a bankruptcy attorney to determine whether settlement is the best option for you. It should only be used as a last resort for eliminating credit card debt, because it can hurt your credit score.