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How to Pay Off Your Credit Card Debt

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If you’re like a lot of Americans, you probably have a few thousand dollars of credit card debt that you want to chip away at.

But the task can seem more than a little daunting, and understandably. Two of the most common questions people have are, “Where do you start?” and “How do you stick to your debt reduction plan?”

Where to start is the easy part. If you’re serious about cutting down your outstanding credit card debt, and at least getting it to a manageable level, you should use the card as little as possible—ideally, you should stop using it altogether. Many people use their credit cards to make everyday purchases when they could use cash or a debit card instead, and those small charges can really add up over the course of a month, let alone a year. As such, cutting out using the card as much as possible is a great way to get a foothold.

But that alone won’t get it done. You also need to increase the amount of money you contribute to reducing your outstanding balance every month. The Credit CARD Act requires issuers to apply payments above the minimum payment toward the highest rate balance. Essentially that means you’re reducing your debt more quickly and helping to ensure that you’re not paying more in interest along the way.

Of course, if you don’t have extra money to contribute to your credit card bills every month, you’ll have to make a budget that you stick to closely, and look for ways to reduce spending in other areas so you can put at least some of that money toward your credit card payments. This might include optional expenses many families face, like eating out at restaurants or going to the movies a few times a month, which can get expensive in a hurry. Even if you’re putting an extra $50 that you would have spent at a local restaurant toward your outstanding debt, you’re making progress.

The most important thing when trying to reduce your credit card debt is to stick to your goals as much as possible and not deviate from your plans. This is a process and it takes some time, but the reward of being debt-free is well worth it.

This article was updated Jan. 17, 2012 to clarify a provision of the Credit CARD Act.

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