Simple Steps to Get Rid of Credit Card Debt

When it comes to your credit score, all debt is not equal. Large credit card balances drive up what’s known as your “credit utilization ratio,” or the percentage of available credit you're using. Credit bureaus determine this ratio by adding what you owe on all of your credit cards and dividing this number by the sum of each card's limit.

6 Steps To Get Out of Credit Card Debt

Since the credit utilization ratio makes up nearly one third of your overall credit score, getting rid of your credit card debt is one of the best ways you can improve in your financial future.  Here are six steps to help you to take control of your debt:

1. Make a budget and stick to it. A budget puts you in charge of your money – it’s the best first step toward a future without debt.
2. Use your credit cards less, or not at all. Studies show that we tend to spend less – a lot less – when we pay with cash.
3. Pay more each month toward your highest-rate credit card. Switch to a lower-rate card if you can and avoid financing anything that takes a long time to pay off.
4. Cut your overall monthly spending. You can pay down more debt by dining out less, bringing your lunch to work and avoiding items you don’t need.
5. Create an emergency fund. Unexpected expenses are a part of life. Set aside a little each month in a higher-interest savings account so that they don’t derail your plan.
6. Pay your bills on time. Making late payments will only hurt your credit score and your own efforts to improve it.

Tools to Manage Your Finances

Check out Community First Credit Union’s moveUP financial wellness program, which will help you improve your money management skills and give you the tools you need to reach your financial goals. You can learn more about paying off credit card balances here.