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How To Reduce Your Credit Debt

Americans hold trillions of dollars in consumer debt—and that's not even including mortgages! Listen up and lower your contribution.


  • Step 1: Cut all cards but one Cut up every credit card except one. Lock that one away for emergencies.
  • Step 2: Add up debt Add up your total amount of debt.
  • Step 3: Calculate assets Calculate your assets, including savings, investments, retirement savings, etc.
  • Step 4: Tally monthly income Tally the total amount of monthly income coming into the household.
  • Step 5: List each card's debt List each credit card, the amount you owe, and the interest being charged on a piece of paper.
  • Step 6: Lower interest rate Get in touch with your credit card companies and ask them for a lower interest rate. Tell them you will be forced to close your account once it is paid off if they can't provide a better rate.
  • Step 7: Prioritize debts Prioritize your credit card debts, beginning with the smallest amounts, then moving on to cards with the highest interest rates.
  • Step 8: Transfer debt If some of the credit card companies will not lower your rates, transfer those balances to another card with a lower rate. These companies compete with each other for business, and are always seeking new customers with this enticement.
  • Step 9: Ask about loan If a balance transfer doesn't help or isn't possible, consult your bank about a debt consolidation loan. You'll end up with one monthly payment, and you'll pay less in the long run than you would with several card balances.
  • Step 10: Spend savings on debt Part with your savings. Most savings and money market accounts are currently paying less than 5%, while credit card interest can be as high as 35%! At that rate, it would take you almost 20 years to pay off a measly $500 balance, if you only paid the minimum due each month.
  • TIP: If you own a home, consider consolidating your credit card debt with your mortgage. This usually reduces your monthly payments, plus you have now made this debt tax-deductible.
  • Step 11: Examine monthly expenses Look at your monthly expenses and see where money can be saved. For instance, getting your internet access, phone, and satellite or cable TV from the same provider can reduce your bill by 30%.
  • Step 12: Track expenses Track every penny you spend for a month. You'll quickly see how those fancy coffee drinks and forays into McDonald's add up. Apply the savings to your credit card debt.
  • FACT: The average American has nine credit cards.

You Will Need

  • List of monthly expenses -- utilities
  • car payments
  • mortgage
  • etc.
  • Latest credit card statements
  • Bank statements
  • Calculator
  • And paper and a pen
  • Retirement fund statements (optional)
  • And an investment portfolio (optional)

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