Guide to Eliminate Credit Card Debt

In cases of serious injuries, a doctor's first order of business is to stop the main source of bleeding. The same tactic works for eliminating credit card debt: The smart consumer takes care of the credit card that's causing the most pain.

Search the financial landscape high and low and you won't find a single expert who advocates maintaining a credit card balance. However, there does seem to be some disagreement over the best way to pay off those pesky balances and their high-interest rates.

Some experts believe that eliminating the smallest balances first will boost your personal morale and give you the willpower to overcome the rest of your debt. Sound financial sense, however, indicates otherwise. A proven method for credit card debt management is to attack the card that charges the highest interest rate first.

Pay more than the minimum

Begin by collecting all your credit card statements and a piece of paper. List each card on the paper, including the balances, the minimum payment, and the interest rate. (You'll find the interest rate on the back of your statement.) Next, add up all the minimum payments into one lump sum.

Once you have that number, take a look at your financial situation. Find out if you can pay more than that minimum. You may need to create a budget to find areas where you can free up some extra cash. Once you've arrived at how much extra you can afford, you're ready to proceed to the next step.

Say bye-bye to high interest rates

Take your list and rearrange it so that the credit card with the highest interest rate is on top, followed by the rest of the cards, listed in descending order of interest rates. Don't pay any attention to the biggest balance. The card with the highest rate will accrue interest rate costs faster than the rest. Remember, you need to stop the bleeding, and stop it fast.

Let's assume that you can cut $100 from your spending and apply it to the minimum payment lump sum. You're going to pay the minimum balances on all the cards, but you'll apply that extra $100 to the card with the highest interest rate. Do this every month, until that balance is gone. Then proceed with the next card, right on down the list. In effect, you'll be eliminating the balances with the highest interest charges, card by card.

There are other tactics for credit card relief, such as negotiating a lower interest rate with your credit card company, or making a balance-transfer to a card with a lower interest rate. Whatever method you choose, experts agree that what's most important is taking decisive action. Credit card balances don't go away on their own, and the high interest-rate cards will inflict serious damage if ignored. Get started on the approach described above. It's a sure-fire method to stopping credit card madness.