Credit Card Debt Elimination

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If you have a lot of credit card debt, there is no need to feel like you're alone. In fact, many people go through a phase in their life when they experience a "financial" crisis. In this publication, we're going to talk about eliminating credit card debt. This includes a discussion of how much debt the average person carries, as well as a process for reducing or eliminating that debt.

Credit Card Debt

The latest consumer debt statistics tell us that the average American household carries around $8,500 in revolving lines of credit, which for most consumers is just another name for credit card debt.

Additional Resources

We realize that this number is an average, and averages can be misleading. However, a discussion of Mean, Median, and Mode is best left for another day. Regardless of the most accurate measure of debt, we can agree that elimination of credit card debt is something people are interested in learning about.

Credit Card Debt Elimination Scams

When researching this article, we came across a lot of information on the growth of debt elimination scams. If someone has a lot of debt, the last thing they need is to fall prey to someone that is going to hustle them out of $2,500. We can only hope that victims of these scams have their good judgment clouded by their dire financial situations.

There is no such thing as buying a certificate that forgives all your debt. If you've read this warning, and you're still interested in how this "certificate" works then let the FBI know, they are interested too.

Real Options to Eliminate Debt

That being said, what are the real options we all have to reduce or eliminate our credit card debt? Here are a few ideas that might help you get back on track.

Develop a Household Budget

We've heard all the excuses: "I'm not a budget person." "I'm not good with numbers." If you have a lot of credit card debt, then it is easy to believe those excuses. The problem is that you're violating a simple financial rule that we all need to obey:

"Money In" must be equal to or greater than "Money Out."

Creating a Budget that Works

Start your budget by listing all sources of income. Then list out your expenses, starting with the important ones. These we'll call mandatory expenses - monthly costs such as rent, mortgage payments, travel to work, utilities, car payments, and insurance premiums. Next, make a list of your discretionary expenses. These are costs that you could cut back, or eliminate, if needed. Discretionary expenses might include items such as entertainment, clothing, or recreational activities.

Most credit card companies offer online services through their websites that allow you to see all of your charges each month. Those reports will help you to identify most of your discretionary expenses. Once you have your list together, establish a priority. Creating a budget is serious business, and will likely involve some painful decisions.

Once you've identified all of your income and expenses, make sure the money flowing into the household is greater than money leaving the home.

Budgeting Worksheets

We've provided online tools in three different articles on this particular topic. There is no excuse for not being able to put together a budget to help you deal with your credit card debt.

In our series on Budget Worksheets, we walk you through the process of creating a budget based on a high-level budget template you can download.
Our article on family budget basics uses a slightly different approach, and allows you to compare your budget to that of an average American family.
Finally, our article on household budget basics provides you with some additional hints on how to create a viable budget that can help you get your credit card debt back under control.

Consolidating Credit Card Debt

A second option you have to reach your credit card debt elimination goal is debt consolidation. You can do this through a second mortgage, or a home equity line of credit. Most lenders will require some kind of collateral, and your home is going to be a natural choice, but think carefully about this decision.

If you find yourself missing your monthly payments, you could wind up losing your house and home. That being said, consolidating your debt into a loan can provide you with certain income tax advantages that are not available through other types of debt consolidation services. Make sure you ask questions about the tax advantages of each option.

Tools for Dealing with Credit Card Debt

We have also prepared several online calculators aimed at helping individuals to figure out what they can do about their credit card debt, including:

Credit Card Payment Calculator - our credit card payment calculator helps you to figure out your minimum monthly payments based on your outstanding credit card balance and the APR on your credit card.
Credit Card Payoff Calculator - our credit card payoff calculator allows you to determine exactly how much you need to pay each month to pay off your existing credit card debt.

Elimination of credit card debt through debt consolidation can be tricky. Formulate a plan for yourself that you can live with in the future. Getting rid of that expensive car or getting a second job can help fill the financial void. Once you start down the right road, stick with your plan, and soon you will find yourself debt free.

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