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Even though it may seem hopeless to reduce credit card debt to something manageable, don’t despair. It can be overcome with some work and planning. You can start taking action today and get control over your finances.

The first time I heard someone tell me they had over $50,000 in credit card debt, they almost had to peel me off the floor. Unsecured credit card debt is a huge problem in our society, and it’s affecting so very many people.

Are you one of them?

Always pay more than the minimum

To avoid paying for what seems like forever, you have to kick in more than the required payment.

Look at how much you pay monthly that’s going towards the interest. Only the amount beyond the interest payment is actually reducing your debt.

Consider your savings

It’s a good thing to have savings! They can mean the difference between disaster and just a problem to deal with.  I’ve known people who consider their credit cards to be ‘available money’ but that’s not a precipice you should be on. Relying on credit to get you out of a emergency isn’t wise – and that’s where savings come in.

BUT — if the interest rate on your credit card is 17%, and the interest on your savings account is 1%, you’ll actually be way ahead in the long run if you put that money towards your credit card.

Borrow against your 401k or RRSP. If you feel like you’re drowning in debt, you can always borrow money from your 401k. All the interest you pay goes back into your 401k and can earn you even more money.

Currently, these loans have to be paid back within 5 years, but you should always double check the details with your bank.

Obviously they’re not something you should do unless you have a plan to pay them back, AND you have accumulated so much credit card debt that it’s unmanageable.

But if you’re in that situation, borrowing against your retirement money can effectively eliminate your high interest credit card debt. The best way is to make sure that the money is removed from your pay before you even see it.

Negotiate with the credit card companies

Credit card companies, like everyone else, want to be paid.

If you truly can’t pay under your current terms, they may be willing to make some adjustments for your situation. Interest rates can be lowered and incurred penalties can be reduced or even removed.

Although these companies are more likely to negotiate if you already have a history of paying late or not paying, it can’t hurt to ask! You might be surprised what they’re willing to do for you if you’re proactive and ask for credit card help from those with a vested interest in having you repay!

Get some credit card help and reduce credit card debt before it ruins your relationships

Find a lower interest card

There are a lot of credit cards out there. Moving your high interest rate balance to one of a lower interest rate can possibly save you a lot of money. About five years ago, we had to max out one of our credit cards to deal with a problem. When we spoke to our bank, they helped us move that debt to a different card that had an annual payment and a very low interest rate. That gave us the breathing space to quickly pay it off.

Also, you can call your credit card company and tell them you’re looking to move your balance to a lower rate card; they might just reduce your interest and save you the trouble.

If you do decide to move your balance, be sure to read the fine print. Sometimes those lower rates are just temporary.

Home equity can help reduce credit card debt

If you’re a homeowner with equity in your house, you can use a home equity loan to pay your credit cards. The interest you’re paying is even tax-deductible in most cases. (Just make sure you put it on your tax return! The best tax deduction won’t help if you don’t use it)

Ensure the payments will be manageable for your situation. Home equity loans can get expensive quickly! Plus, your home is your collateral with a home equity loan, so if you don’t make your payments, you could lose your home to foreclosure.

Whatever strategy you use to reduce credit card debt, avoid the common mistake of running up the balance on your credit cards again. Then you’ll potentially have a loan and a credit card balance to deal with.

A friend of mine recently asked what to do about her credit cards. She knew that she would fall to the temptation and rack up more debt, but she was concerned that canceling them would negatively affect her credit rating.

And it might. Let’s be really honest – it looks bad to cancel a bunch of credit cards.

But high debt that you can’t pay off, late or missed payments, and increasing interest charges will look even worse, and they’ll have a negative impact on your daily finances.

If you know you’ll just rack up more debt, then certainly cancel those cards and move forward on a cash-only basis!

If you’ve got a lot of debt, please don’t wait for it to get worse.

Pick the best idea for your situation and charge full-speed ahead. It IS possible to reduce credit card debt – or even eliminate it entirely.

Imagine how much better you’ll feel when that credit card statement arrives in the mail, and the balance owed reads $0.00!

Just Plain Living

It takes some work and planning to reduce credit card debt, but it's worth doing. Increase your available money and decrease your stress with these ideas.

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