By the end of 2018, Americans had rung up $900 billion on their credit cards.1 Credit cards are fairly easy to qualify for. Before you know it, you may feel like you’re not making any ground paying them down, much less paying them off. If this sounds familiar, take a deep breath and realize that with determination, perseverance and a plan, you can start reducing your credit card bills immediately.
I said start. Paying them off completely is going to take some time. However, with a solid plan based on the nine tactics below, with diligence, and by changing some of your spending habits, you will find yourself gaining more control over your credit card debts with every passing week.
One thing is for sure — you can do this. Let’s dive into how.
9 Ways to Take Control of Your Credit Card Bills
1. Examine and document your finances
First things first: You need to take a detailed look at your sources of income and financial obligations. Start with your income — your salary, as well as interest you may earn on savings, dividends from investments and other ways that you earn money. Next, make a list of everything you owe — not just your credit card bills, but your monthly bills as well, like rent or mortgage, utilities, car payments, insurance, groceries, fuel, etc.
As you list the credit card balances you’re currently carrying, make notes about the interest rate attached to each card, which you’ll need to know for several of our other recommended tactics.
2. Prioritize what you spend
The answer to “How can I reduce my credit card bills?” always starts with getting an accurate picture of what you’re spending. Obviously, you have to pay for life’s necessities—real necessities like food, housing and medications, NOT things that you convince yourself that you need but which you can live without. This is where self-discipline comes in. Trying to get out of debt is going to include some sacrifices. Putting down on paper or into a spreadsheet what you spend and what you earn is a real eye-opener. You’ve got to divvy up your income and take care of existing financial commitments. After the true necessities, you’ve got to make sure you pay at least the minimums on all of your secured debts, the ones where something is at stake if you don’t make timely payments, such as your house and likely your car. If you have additional secured loans on nonessential assets like, boats or a second car, by all means, consider selling them and using ALL of the proceeds to pay down your credit card bills.
Next, make sure you’re making at least the minimum payment on all of your credit card bills, too. You don’t want one late payment (and certainly don’t want to incur a late-payment penalty, which can range from $10 to $402 or more), so make sure you have all your bills set up to be paid on time, every month.
3. Create a budget
Maybe the lack of knowledge about personal finance invokes the dread many of us feel at the very thought of making a budget. But creating a budget is essential if you’re ever to get a handle on truly balancing what you spend with what you make. Online budgeting tools make this accounting much easier, or you can pen-and-paper it, but by all means create a budget — It’s a very instructive process that everyone should undertake.
4. Discover ways to cut expenses
If you’re like most people, creating your budget has probably made you realize that you’re spending a far higher percentage of your income than most financial advisors would suggest. Now’s the time to find out how to improve that percentage by cutting expenses. Do you need all those cable channels, or can you reduce what you spend on in-home entertainment by subscribing to one or two streaming services instead? Same with the landline phone that may be bundled with your internet and/or TV. Cut ruthlessly — the deeper the cuts, the more of your income you can apply to your credit card bills. Are you really using your gym membership to its fullest? Is there a less expensive option? Do you have satellite radio in your car? Are you still paying someone to brew your coffee? A $6 cup of coffee every workday adds up to more than $150 a month and can total $1,500 or more over a year.
You’ll spend a fraction of that by making your own at home, or waiting until you get to work for your first cup. That’s real money that you’re not using to get out of debt. The more deeply you cut your expenses (assuming you use ALL of those savings to pay down your bills), the faster you’ll be out from under your debt.
5. Develop a credit-card payment strategy
Now that you’ve mapped out your income and your obligations with a budget, and made substantive cuts, it’s time to create a strategy for making significant credit card payments.
There are two schools of thought, and both schools assume you’re making the minimum payments on ALL of your credit cards. One approach is to make extra payments on the credit card with the highest interest rate first, because that will save you the most money in the end. The other approach suggests paying off the smallest bill you have, so you can be rid of it sooner, and get the mental lift you’ll earn from totally eliminating one of your bills. Which route you go is a personal choice. Choose the one that you’ll be motivated doing.
The main point is that you’re diligently paying every spare dollar toward getting out of your overall credit card debt. It goes without saying (but I’ll say it anyway) that you should not be using your credit card except in emergencies. You don’t need to be adding to a balance you’re trying to eliminate. If you don’t have the cash to pay for something, you shouldn’t be considering it. Use a debit card so you’ll be forced to thoughtfully weigh each purchase, as well as have the money in your account to pay for it.
6. Ask your credit card companies to lower your interest rates
The old saying “it never hurts to ask” can save you a considerable amount of money when it comes to paying off credit card bills. So ask your credit card company to lower your rate. But ask before you have a late or less-than-the-minimum payment. Credit card companies are more apt to grant you an interest rate reduction if you’re a customer in good standing, as a reward, perhaps, but certainly they will be less inclined if they think you are in some kind of financial trouble. If you’re thinking of rolling one card balance onto another card (balance transfer), use that opportunity to try to negotiate a better rate. Call and tell your higher-rate credit card company that you want to close the account by rolling it over onto another, lower-rate card.
Often times, they’ll offer to lower their interest rate to entice you to stay with them. Be bold in your request—all they can say is no. Perhaps, however, they’ll meet you halfway. Do your homework so you know what other card companies are charging, and keep your request in line with current rates.
7. Take advantage of special 0% balance transfer offers
Depending on the offer, a balance transfer could be a great way to jumpstart paying off your credit card bills. If the period with the 0% introductory rate is significant enough, AND if the rate that it converts to after that period is competitive with your current credit card rates, by all means take advantage of the opportunity. A fee may be associated with going this route, but weigh that against the interest you’ll save, and you may have found another tool to help you take control of your credit card bills. If you do use this tactic and pay off one or more of your credit cards, cut up your old cards. You can’t use what you no longer have. And when the balances hit zero, close the accounts, too.
8. Get professional help if you think you need it
If all of this is just too much to undertake on your own, maybe it’s time for a legitimate credit counseling agency to help you create a plan. But be warned! There are unscrupulous for-profit “credit counseling” companies out there that are most interested in separating you from even more of your money. Do your homework to find a reputable organization. The United States Department of Justice’s list of credit counseling agencies is a good place to start your search.
9. Consider a debt consolidation loan
Some of what becomes overwhelming for people with multiple credit cards’ worth of debt is managing various payments at different times, or deciding which to pay first. Credit card consolidation can help, as it leaves you with just one monthly loan payment, gives you an end date by which you’ll be out of debt, and creates the certainty and peace of mind that are important in regaining a financial foothold. There are other reasons to consider consolidating credit card debt with a personal installment loan. Educate yourself with the options available to you.
Whatever the reasons are that you find yourself with credit card bills, know that there is a way out. The process won’t be as easy as incurring the debt was, but getting control of your credit card bills is important and doable. And the upside? You’ll have learned budgeting skills, the self discipline needed to live without debt, and how to make sacrifices that help you achieve your long-term goals. Plus, you’ll experience the indescribably great feeling of making your last credit card payment and ushering in debt-free living!