6 Steps To Become Credit Card Debt-Free in 2020
/According to the New York Federal Reserve, household debt within the United States was nearing $14 trillion as we entered the second quarter of 2019. Household debt includes mortgages, student loans, auto loans, credit cards and other forms of personal debt. Each form of debt has a different impact on your financial health and carries a different meaning when it comes to your money mindset. In this article, we will focus on credit card debt. The breakdown of the credit card debt within the United States is the following:
More than 189 million Americans have credit cards.
The average credit card holder has at least four cards.
On average, each household with a credit card carries $8,398 in credit card debt.
Credit card debt typically comes with high interest rates, usually hovering around 19%. Ideally, if you use a credit card it would be paid off that month as to not incur fees. For those that are struggling to make ends meet or are unexpectedly hit with a large bill, credit cards are sometimes that only option. Outside of these instances, they should be used as a last resort and if they are being used to cover your day to day needs, it is time to focus on financial stability by increasing your income and reducing expenses.
If your credit cards are being used for non-essential items then it is definitely time to adjust your approach to finances. It takes a commitment to yourself and your financial health to make positive changes to elevate your financial wellbeing.
I had a blast as a guest speaker at the Black Millennial Wealth conference.
Before I jump into the steps, it goes without saying that in order to become credit card debt-free, you have to stop using your credit cards and commit to only buying items that you can afford with the funds you have in your bank account. Once you have made up your mind to become debt-free, here are six steps you can follow to reach your goal.
Six Steps To Become Credit Card Debt-Free In 2020
Elevate your money mindset. If you have found yourself in a cycle of carrying credit card debt for an extended period of time, or fluctuating between no credit card debt and high levels of debt, the first place to critically examine is your mindset. There is likely a part of you that does not believe you are worthy of having a peaceful relationship with money. Examine your money story and assess the beliefs and behaviors that need to change.
Calculate your debt total. In order to pay off your debt, you need to know how much you hold. Create a simple spreadsheet detailing your credit cards, the respective balances and interest rates.
Choose a debt payoff strategy. There are few ways to go about paying off your debt. They will all require discipline, focus and consistency.
One method is the snowball method where you pay off the card with the lowest balance first, while paying the minimum amount on the other credit cards. Once you pay off the first credit card, then you snowball those monthly payments to the next credit card.
Another method is the avalanche method where you pay off the card with the highest interest first, while paying the minimum amount on the other credit cards. Once you pay off the first credit card, then you avalanche those monthly payments to the next credit card and so on.
A third method is to do debt consolidation. This is where you call your credit card companies and ask if they will consolidate your credit card balances onto one card. Typically if they do this, they will offer a lower interest rate on the card. This can be great for some people because it results in having only one payment per month versus several payments which can be overwhelming.
A last resort method is to file bankruptcy. Sometimes this is the only option for folks to get out from under crushing debt. Work with a legal expert to determine if this is the right path for you.
Create a debt repayment plan. Once you have chosen your strategy (either 1-3), establish when you wish to pay off the debt and calculate how much you need to pay each month to reach your goal.
Consider a balance transfer. Depending on your credit score, some credit cards will offer you the option to transfer your credit card balance to a 0% interest credit card. Keep in mind that this 0% interest will only last for a short period, and once the time period is over then the interest rate will skyrocket. To find and compare credit cards, check out our friend’s over at Crediful.
Check in on your progress during your weekly money date and with your money buddy. Regular check-ins are imperative for staying on track towards your goal. If you do not have your weekly money date checklist, join the Money & Mimosas list to download your free copy.
About Money & Mimosas: Money & Mimosas was started as a passion project by Danetha. A former NFL cheerleader turned entrepreneur, she started blogging as a way to combine all of her passions into a career. Money & Mimosas is now enjoyed by readers in over fifty countries with the same dream of achieving financial freedom without living frugally.
