If your New Year’s resolution is to get out of credit card debt, you now have a powerful tool at your disposal: your credit card statement. Most cardholders have probably noticed by now that their credit card statements now include a warning noting how long it will take – and how much it will cost in interest – to pay off your credit card debt if you only make minimum payments (see a sample disclosure here). Below that information you’ll also find a figure that shows how much you’ll have to pay each month to be debt-free in three years.
And that’s the key to succeeding with your 2011 resolution. Here’s how:
Step One: Stop adding to the balance. For any cards on which you carry a balance, put them in a safe place where you can’t use them easily (a safe deposit box, for example, or in a baggie frozen in a bowl of water). If you are using a card to pay any regularly recurring bills, cancel that automatic payment so you won’t have any new charges going on the card. This method will not work if you are continuing to charge.
Step Two: Set it and forget it. Set up automatic bill payment so that the 3-year payment amount is transferred from your checking account to pay your credit card bill(s) on the due date(s).
Step Three: Get help if you need it. If you are not sure you can stop charging and make that 3-year payment amount each month, then look on your statement for the contact information for credit counseling help or visit Credit.com for a free debt consultation. A pro will help you review your budget to see whether there are changes you can make to stick with your own plan, and if not, whether a Debt Management Plan may be an option. With a DMP, the agency will put you on a 3-5 year debt payoff plan, often at reduced interest rates.
If it turns out you can’t follow the 3-year payment plan on your statements, and a DMP is not an option because you have too much debt and/or too little steady income, then your best bet is to make an appointment with a bankruptcy attorney for a free consultation, and possibly consider debt settlement as well.
This may sound like a simplistic approach to digging out of debt. Of course, life will intervene with surprise expenses and financial challenges. But it can work if you’re motivated, and stay that way. To do that, focus on how nice it will be to celebrate New Year’s Day 2014 debt-free. It will be here sooner than you think.