Finances in 55 Seconds: Create a Credit Card Debt Reduction Plan

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Credit Card PlanOne of the best things you can do for your finances is to pay down your credit card debt. Credit cards are notorious for high interest rates and fees. Once you are trapped in the cycle of making credit card payments, it can be difficult to get out. And, worst of all, the interest that you pay on your credit card balances goes straight into someone else’s bank account. Interest, paid for the privilege of borrowing money, offers you no other benefit. It’s pure expense.

If you want to improve your finances, and move along the path to financial freedom faster, it is best to pay down your credit card debt as quickly as possible. Creating a debt pay down plan can seem a daunting task, but it doesn’t have to be. You can put together a credit card debt reduction plan in 55 seconds or less:

  1. List all of your credit card accounts: Make a list of your credit card accounts, jotting down your current balance, the minimum payment, and the interest rate. When I did this my list followed this format: BOA Visa – $2,500 – $75 – 9.99%. (16 seconds)
  2. Figure out which order you want to pay them off in: Next, decide what order you want to pay your credit cards off in. Either order it by starting with the lowest balance, or by starting with the highest interest rate. Paying of the high interest card will save you money in the long run, but there is something to be said for the emotional boost that comes from starting with the lowest balance and paying something of quickly. (7 seconds)
  3. Decide how much you can pay toward debt reduction each month: Review your monthly budget, including expenses. This can be done quite quickly if you have personal finance software, or use a web app. Figure out where you can cut back on waste. Experts estimate that most households waste 10% to 15% of their income each month. Look through yours, and decide how much wasted money you can reclaim and put toward debt reduction. (23 seconds)
  4. Write your first debt reduction check: Take the amount you can spare from your budget and add it to the minimum payment of the first credit card you plan to tackle. So, if your minimum payment is $75, and you can spare $100 from your budget for debt reduction, your payment will be $175. (9 seconds)

Every month, make sure that extra amount is going toward the credit card account you are working on. You continue to pay the minimum on all of your other credit cards. When you pay off the first credit card on your list, you can take the entire amount an apply it to the next card on your list. So, if your next card has a minimum of $65, you would add the entire $175 you have been paying on the first credit card to the minimum for a new payment of $240. Dave Ramsey popularized this time-tested technique as the “debt snowball.”

While it will take you considerably more than 55 seconds to get rid of all of your credit card debt, it doesn’t mean you can’t get started in less than a minute. A few seconds is all you need to kick start your debt pay down plan.

(Photo: pumpkinjuice)

{ 9 comments, please add your thoughts now! }

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9 Responses to “Finances in 55 Seconds: Create a Credit Card Debt Reduction Plan”

  1. I want to eliminate most of my debt by the end of this year. I’m hoping to eliminate all of my credit card debt and then work on eliminating my loan.

  2. Amy Saves says:

    I always try to pay more than the minimum amount. Good tips!

  3. Ross says:

    Now that I’ve paid off nearly all of my debt, with only a small amount of credit card debt left, it seems clear to me that it really doesn’t matter what you pay off or in what order…

    Just as long as you simply start!

    It’s far too easy to get paralyzed and do nothing because of too much thinking, planning, reading, and learning. Just do something.

  4. Figuring out what you have to pay off is the easy part of getting rid of those debts. The hard part is the slow agony of every day as you sink under the burden of your debts!

    You begin to think that you’ll never be out of debt! And then you realize that it’s only been 6 days since you started….

    It takes time and discipline. That’s the real need for paying off your debts.

  5. skylog says:

    thank you for the good post. i feel just starting is the most important part…more or less in anything and without question when it comes to finances. just simply sitting down, taking stock and developing a plan, a goal, can get one started down the road to financial freedom.

  6. Sam says:

    Great article. I just paid off my car (it was a smaller balance owing at the time) now i am going to take that entire car payment and apply it to my credit card. I just hope i can stay disciplined enough not to use the credit card while I’m trying to pay it off. As ridiculous as that sound its not that uncommon. A lot of my friends have the same issue, they live pay to pay so they end up using their credit card when they have to fix their transmission or take their dog to the vet.
    I think the real key is not using the credit card for anything no matter what.

    • Steph says:

      That’s my next step. I’ve made my debt payoff plan, but I can’t get out if I don’t stop using those cards. Sometimes I get caught up in the, “but I could be earning points” mentality with my Sky Miles CC, but those points cost me more money each month if I can’t pay off the entire balance. I will be hiding my CCs until I have proven to myself that I can stick to my budget.

  7. admiral58 says:

    if only it was that easy to just list your cards and pay them off. Need money to make those payments

  8. Kate says:

    Was deeply in cc debt a year ago, then started debt snowball. After paying off two cards (out of 7), received 2 0% balance transfer offers..and took them. Made a huge difference to jettison 15.24% cc debt to 0% cc debt. But then car was totaled, so took the insurance $$ and paid off 2 more cards and got a 3.49% loan rate on the new used car. Now one year later, I am $12000 more in debt because of the car, but monthly payments are way less, and will pay off all cards and the car in 1 1/2 more years. Hardest part is the looooong time to get this over with and avoid temptations along the way. You have to be committed.

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