10 Ways to Dig Yourself Out of Credit Card Debt

by Brian Reed

Are you struggling to figure out how to get out of credit card debt? You're not alone.

Americans collectively carry more than one trillion dollars worth of credit card balances on their cards. More than one in three Americans face a credit card balance every day. Making matters worse, one estimate by USA Today found that the average household with credit card debt may be facing a balance of more than $16,000!

But it doesn't have to be this way for you. If you are one of the millions of Americans burdened by credit cards, here are 10 ways to help you dig yourself out of trouble.

1. Stop Using Your Credit Cards

The first step in ridding yourself of credit card debt is to stop adding to your balance and stop using your credit card altogether. A study by Javelin Strategy and Research that observed consumer spending habits on Cyber Monday found that the average credit card purchase was $82.10, while the average debit card purchase was only $58.29. Another study by the Journal of Consumer Research found that consumers who paid with credit cards had a greater propensity to spend.

Yes, credit cards are convenient, but if each purchase is increasing your charged interest then using card isn't worth it. It will be difficult at first, but switching to an all-cash system will help you stay within your monthly budget. Spending with cash is another way to become aware of what you spend so that you can waste less and apply more toward quickly minimizing the balance.

2. Cut the Fat From Your Budget

It might sound obvious, but it is essential to live within your means in order rid yourself of credit card debt. If you haven't already, take a good look at where your money goes every month and cut out all non-essential expenses.

Eating out is one common area where funds can drain your monthly budget. Overspending at the grocery store, impulse buys on the weekends and daily lattes are other areas where the fat can often be trimmed. Check out the 25 Ways to Save Hundreds on Your Monthly Expenses for more ideas.

3. Track Your Spending

Behavioral studies have shown that individuals who keep a record of every purchase spend less money. You can do this electronically or with the old-fashioned pen and paper. Of course, it's best to do it with a written budget, but even with no budget in place, just becoming aware of what you spend through tracking has been proven to positively affect your bottom line.

Review your results weekly to see if your spending is on track with your goals.

4. Get a Game Plan

Paying credit card debt can seem like endlessly throwing cash into a black hole. A great way to take charge is to determine the maximum amount you can pay and how many months it will take you to become debt-free.

Having a plan will help you reach your goals faster, and having a "debt-free goal date" can keep you on track when times get tough.

[Lower your APR, pay your debt off faster! See How to Build Credit Fast on $30k a Year or Less]

5. Prioritize Which Debt to Pay Down First

Not all debt is created equal. If you have two credit cards and one has a 6.5% interest rate and another has 12%, the long-term cost of the loans will be different. By shifting your extra payoff efforts from the lower-interest card to the card with higher interest, you could greatly reduce the total amount you'll owe after interest charges in the long run.

Some financial experts recommend the "debt snowball" technique, which involves paying the minimum on all your debts except for the one with the smallest debt first --where you'll make extra payments to pay it off first. The idea is to eliminate the lowest balance to create positive momentum and psychological encouragement ("Yes, look at how well I'm paying off my debt!").

After you've paid off the smallest balance, you can then use what you were paying toward the balance of the next smallest debt in line. One by one you'll pick off your debts until it's all gone!

6. Consolidate Credit Card Debt With a Balance Transfer

If you have balances on multiple credit cards, consolidating those balances onto one card through a balance transfer may be an even simpler option A balance transfer involves transferring the money owed on one or more cards to one card that has a lower interest rate -- which could save you hundreds or even thousands of dollars in interest charges over time.

[Tip: Our list of The 4 Best Cards for Balance Transfers will show you some cards that let you pay 0% APR on the balance you transfer for up to 21 months.]

Keep in mind that balance transfers may involve a fee -- usually 3% to 5% of the total balance amount -- -- so be sure the long-run savings outweigh the hit you'll take in transfer fees.

7. Drain Your Savings Account

Having money set aside for emergencies is important, but the interest earned from any additional money held in a savings account pales in comparison to the interest you're paying on a credit card. What's the sense in earning 1 to 2% in interest on an extra $1,000 sitting in a savings account or CD when you're paying 18% in interest on a credit card with a $1,000 balance on it?

I think the better solution is to reduce the amount owed on a credit card by using some of your savings. Then after the debt is paid off, you can begin to build back your savings. Throwing every extra penny you have onto your debt will help you become debt-free that much faster.

8. Sell Your Stuff

If you're like most people, you have plenty of stuff around your house that you never use. Hosting a garage sale or posting items for free on Craigslist or Facebook Marketplace can help you free up closet space and make money to put toward your credit card bills.

You may also consider bartering. There are a number of new websites that offer swapping services like www.ThredUp.com, which lets you trade clothes for example.

9. Get a Second Job

There are basically two ways to get your finances back in order: by reducing expenses or increasing income (or both). A part-time job is a surefire way to increase your monthly income and an effective means for eliminating debt -- as long as you're adamant about using the extra income only for that purpose.

Whether its waiting tables, baby sitting, freelance writing or filling out online surveys, find a way to increase the money you bring in each month and pay it straight to your debt.

10. Negotiate with Creditors to Settle Your Balance

Negotiating with credit-card companies to settle your balance isn't the optimal solution, but depending on your situation, it could offer a viable resolution. It provides the opportunity to pay a lump sum to clear the debt, which is often less than the amount owed, or lowering your payments for a few months while you get your head above water.

Just remember, a lump-sum settlement can severely penalize your credit score (it's ultimately considered a default), so be sure you're clear on the implications before you agree to the terms.

[Try saying these magic words to slash your APR and your credit card bill by hundreds.]

We all know how credit card debt can be a mental weight that keeps you feeling defeated and overwhelmed. But as you begin to shed these obligations, you'll find that with every card paid off, a burden is lifted off your shoulders. It's not an impossible task, and with a solid game plan and small behavioral changes, you'll be debt-free before you know it.

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