How to Reduce Credit Card Debt?


This is a question I got from a reader : “Mr Credit Card, I have about $23,000 in credit card debt. How can I reduce my credit card debt? What are the steps that I have to take?“.

Well, the reader did not state how many credit cards he had and what rate he is paying on them, and what is the minimum payment on each card. But here is my general guideline on how to reduce credit card debt.

Write down exactly what you are spending on

Sounds elementary, but you first have to know why you have so much credit card debt. Are you spending too much on drinks in the evening? Are you making too many impulse purchases? Are you dining out too often? Know what you are spending…then

Cut out unnecessary spending

Once you have identified where you are overspending, the next step would be to cut back on these expenses and stop piling on new debt. The only way you can reduce debt is to stop adding on to your debt burden.

List your credit card debt by debt amount and also by APR

The next step is to know exactly how much you owe on each credit card and what the APR is on each card. Conventional wisdom says you should attempt to pay off the card with the highest APR. However, you may also choose to start by paying the card with the smallest balance to give you a psychological boost from seeing one credit card debt eliminated faster. The choice is yours, but develop a plan of attack.

Tighten your budget and find spare change to pay off your credit card debt

OK – you have now identified what you are spending and why you have got into credit card debt. The next step is to sacrifice some discretionary spending and get some extra cash to pay off your credit card debt. Once you have eliminated one credit card debt, use the extra cash you have to pay off the next card. Wash, rince and repeat until you have completely eliminated your credit card debt.

Extra Tips – Get a 0% APR Balance Transfer Credit Card

To aid in your debt reduction effort, you may want to consider checking out credit card balance transfer offers for debt reduction. There are cards that give you 0% offers for even as long as 12 to 15 months. Just make sure you get cards that do not charge any balance transfer fees. If your credit is not so good, there are also bad credit balance transfer credit cards.

Should you consider credit card consolidation loans?

If you can afford to budget in cash to pay off your credit card debt bit by bit, I would suggest against getting a credit card consolidation loan to pay off your debt. These loans are typically home equity loans with much lower rates. However, if you default on these loans, then you will lose your home. If you default on your credit card, you are not going to lose your home!

Stop using your credit card if necessary

Some might find that cutting up their credit cards will help reduce their spending on “stuff”. If you find that it helps, then there is no harm simply paying cash for everything and suffering a slight inconvenience.

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6 Responses to “How to Reduce Credit Card Debt?”

  1. barry broome Says:

    Nice article! That’s good advice. I think too many people just simply don’t have a budget and don’t track their spending. Unfortunately we have a culture that lacks fiscal discipline and responsibility. Buy now and pay later – that mindset has to be stopped!!

  2. Nick Says:

    I would also suggest that this individual call their credit card companies and request a lower interest rate. Sometimes, all you have to do is ask and you can end up paying much less interest.

  3. William Blake Says:

    I agree with Nick’s comment – it never hurts to call your credit card companies and ask for a better rate. The worst they’ll say is no. If you really want to improve your chances of getting a better rate, do a little research first and find some other cards with lower rates. If you threaten to transfer your balance to a different card, your credit card company will probably be more interested in adjusting your rate. Less interest is still better than none, which is what they get if you transfer your balance to another card.

  4. JimE Says:

    Your last point – ‘stop using your credit card if neccessary’ – I would think if you are struggling with debt it would be 100% neccessary & one of the first things you would do.

    You don’t have to actually cut up the card, maybe just keep it in a drawer somewhere. It’s when it is in you pocket that there is a temptation to use it! It’s always nice to have one available for an emergency!

    I thought this article was also very useful. It’s not quite as comprehensive as yours but there are a few good tips that your readers might benefit from.


  5. Moneyman Says:

    Credit card debt is taking over the country, and most people are charging more due to the recession. This is not uncommon, however, the time is going to come when it is time to repay all of those debts and when that happens, hopefully those of you who have charged more because of lack of money will have what you need to pay off the debt. However, if you are one of the millions of Americans who find yourself in a difficult situation when it comes time for payback, then it is time to collect debt consolidation information from whatever sources that you can find.

    When considering what debt consolidation information to use, the first thing that you should do is consider the source. Where did you get the information that you are using, is it an official source? You can get a lot of information about debt consolidation on government websites, which are very reliable sources in the respect that their information will be unbiased and will not direct you to a specific company to use for your debt consolidation.

    You will learn in detail from your debt consolidation information about the two different kinds of debt consolidation, credit card consolidation loans and credit counseling services. These are two very different programs, where taking a loan means just that, however, if you have a lot of debt or bad credit you may have to use your home as collateral or get a co-signer to get the loan, which may not be idea. Credit counseling services mean that you allow a company to negotiate with your creditors for lower payments and to eliminate your interest. The downside here is that you have to close all credit accounts or the credit counseling service will not work with you, also, this does show up as a negative on your credit report, although not as negative as not paying your debts.

    There are a couple of other options that may not show up in your debt consolidation information like credit card debt settlement, which is paying a company to negotiate lump sum payments with your creditors at a value less than what you owe. Another is to just do it yourself, without the help of any companies. The upside here is that your credit is not affected if you continue to make payments on your accounts. The ultimate goal for any of these plans is to pay off your debt as quickly as possible.


  6. 113th Carnival of Debt Reduction – Questions / Answers » No Credit Needed – Debt Reduction Rocks – We Are Living Debt Free! Says:

    […] 15.  Are you trying to payoff your credit cards?  Ask Mr. Credit Card has suggestions and a cool “how to”. […]

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