5 Steps to Eliminate Credit Card Debt

Put an end to credit card stress once and for all.

Posted on | By Ric Edelman | Comments ()
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Do you worry about credit card debt throughout the day and even at night?

If so, that stress can take a serious toll on your health — contributing to increased risk of heart attacks, ulcers, migraine headaches, depression and other ills, medical experts say.

And credit card debt can easily get out of control, making it more problematic than other forms of debt, such as mortgages and car loans.

Here are the five steps to help eliminate your credit card debt.

1. Ignore budgeting.

Budgeting is a complete waste of time. Most people hate doing it, anyway. Few do it, making you feel guilty, and that just adds to your stress. So let’s just take it off the table. See? This is fun!

2. Set a positive short-term goal to stay focused.

A positive goal is something like, ‘I want to take a vacation;’ whereas a negative goal might be ‘I will not spend money.’ You have to make your goal specific and real — something you really want to achieve, a reward that isn’t far away. If your goal is too general and too far away — such as retiring or paying for college — you’re less likely to stick to it and succeed.

3. Do a one-week reality check.

Keep doing what you normally do, but record all of your expenses for one week. Write down everything — from that 50-cent pack of chewing gum to the $5 latte to the $60 sweater. You can use paper and pen, an Excel document, Quicken software — whatever’s easy for you.

At the end of the week, add everything up and compare it to your income. You’ll immediately see where you’re overspending.

4. Focus on paying off one card at a time.

There’s a powerful psychological component to paying off debt. Most people assume that the card with the highest balance should get first attention, but instead, tackle the one with the highest interest rate first. You won’t get rid of your debt overnight, and meanwhile interest is accruing. So make the minimum payments on the other cards and pay all that you can to the highest-interest card until it’s paid off. Then move to the next.

5. Pay off your debt faster with my express-lane strategy.

As you reduce your spending, move into the express lane. That means making two minimum payments per month. Credit card companies typically charge interest on a daily basis, so the sooner you pay, the lower your average daily balance will be. After making a minimum payment, make a second one two weeks later — set a calendar reminder for yourself.

How much faster can you pay off debt with this method? Let’s say you owe $2,000 on a card that charges 17% interest. If you make just one minimum payment each month, it will take you 21 years to pay off that card. But with two minimum payments per month, you’ll do it in only two years!

For more information on Ric Edelman, visit www.ricedelman.com.

Advisory Services offered through Edelman Financial Services LLC. Securities offered through Sanders Morris Harris Inc., an affiliated broker/dealer, member FINRA/SIPC.

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Article written by Ric Edelman
Chairman and CEO, Edelman Financial Services, www.edelmanfinancial.com