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Content: Credit card tips to eliminate credit card debt, Stop adding to the Credit cards problem, How to set up a budget for your Credit Cards, How to Use cash rather than credit cards when possible, How to get a better rate on your existing credit card, How to apply all extra cash to the debt with the highest interest rate.
Credit card and other personal debt is an unfortunate fact of American life. Our consumer society bombards us with buy-it-now messages through every conceivable advertising medium. Of those households that have credit cards, about 58 percent carry a balance, according to the Federal Reserve. This is an alarming statistic that should get everyone’s attention.

The only wise course is to eliminate credit card debt — and to begin now. According to financial experts, there are five steps to becoming debt free.
Step 1. Stop adding to the problem. If you are thousands of dollars in debt and continue spending more on your credit cards than you make things are obviously not moving in the right direction and only getting worse. You must stop using your credit card to borrow from tomorrow for what you want today.

Step 2. Set up a budget. This can be a difficult exercise for many of us since easy access to credit cards allows us temporarily to hide the truth — that we spend more than we make. The interesting part of budgeting is that it spotlights how much wasteful and unnecessary spending we engage in that can be curtailed without undue pain. Nondiscretionary items such as mortgage or rent, utilities, food and insurance take up the bulk of most household budgets but it’s important to allow yourself some mad money to play with if possible every month. The difference is that instead of giving yourself carte blanche to get anything you want with a credit card, spend a fixed amount on discretionary items.

Step 3. Use cash rather than credit cards when possible. There is a reason that casinos give you chips to spend instead or requiring cash: People don’t attach the same value to noncash substitutes and will spend and bet more freely. It’s the same with credit cards, and retailers know it. People spend more when using a credit card versus cash for purchases. The next time you buy pair of new shoes or the latest CD, instead of scribbling your name on a charge card receipt, try laying out the cash. It’s amazing how it makes you think twice about impulse purchases.

Step 4. Another thing to do to eliminate credit card debt is to get a better rate on your existing credit card. If you have thousands in personal debt it can really help the monthly cash flow if you are able to transfer those balances onto a low interest or 0 percent APR credit card. Your credit rating will generally determine whether you can be eligible for the lowest rate offers but it could definitely be worth the effort. The low introductory “teaser” rate will last for only six to 12 months, but a smart consumer will use that time to aggressively paying down the debt, not running up more debt. (You didn’t already forget Step 1, did you?)

Step 5. Apply your newfound cash flow to retiring that debt. To eliminate your credit card debt the fastest, apply all extra cash to the debt with the highest interest rate. Living within your income, establishing a budget, paying cash (and spending less) along with better interest rate terms on your credit card debt should save you hundreds each month.

5 steps to eliminate credit card debt. [By Emily Starbuck Gerson and Ben Woolsey, Published: January 4, 2005 Creditcards.com]

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