6 Tips to Help You Reduce Your Credit Card Debt

For decades our society has spent money we don’t have. Conspicuous consumerism was a term that was fashioned in the 1980’s and continued until the Great Recession hit in 2008. If we didn’t have the money for it, we simply put it on our credit cards. Some households carried credit card balances that would rival the mortgage of a nice home. Who cares about the balance when all we really have to do is make the $153.67 minimum payment?

Photo by meddygarnet via Flickr

Credit Card Debt: Things Are Changing

An August, 2011 TransUnion report stated that in the second quarter of 2011, average credit card debt fell to a 10-year low of $4,699 per borrower, which is a year-over-year decline of 5%. Additionally, the number of 90-day delinquencies fell to a 17-year low. You may think this is due to banks writing a lot of this debt off. In July, TransUnion released a report showing that credit card holders made $72 billion more in payments than purchases between the first quarters of 2009 and 2010, which compares to write-offs of $86.6 billion during the same period. So, only 55% of the decline was due to write-offs; the consumer gets credit (no pun intended) for the rest of the decline.

Reduce Your Credit Card Balance

So, You Want To Be Just Like Those Folks? Follow these tips and watch your credit card balance shrink:

Spend consciously

THINK about everything you spend your money on. Here are some questions to ask yourself:

  1. How will I pay for it? (Hint: it should be cash; if you don’t have it, you can’t buy it.)
  2. How often will I use it? (Hint: probably not at all.)
  3. What will happen if I don’t buy it? (Hint: the world will NOT come to an end.)
  4. How did I ever get along without it? (Hint: the same as everything else you’ve bought impulsively.)

Money is time

No, it’s written correctly. Part of spending consciously is realizing how much something really costs; that’s why this strategy receives it’s own category. You trade your time for money, so money really is the physical manifestation of time. The next time you buy that latte, think of it in terms of how long you had to work in order to earn the dollars to buy it. This might keep you from buying it and charging it on your credit card; especially if you don’t pay off your credit card, that latte will cost you even more hours of work in terms of interest charges.

Write all your expenses down

Are you kidding me? Do I have to keep track of everything I spend? YES. You will be astonished at where you money goes. Legend has it that 21 days makes a habit. After that, you’ll be doing it naturally on your own. However, at the 21-day mark, multiply everything you’ve spent (and written down) by 17 — 17 times 21 days is 51 weeks. Okay, it’s not quite a year, but pretty close. You’ll be annualizing all your spending and further amazed at how much you’re spending on soft drinks every year.

Spend with cash

Research shows you’ll spend 20% less when you spend with cash. Why? Because you’re actually giving something up. It’s like someone is stabbing you in the gut with an ice pick every time you shell out a dollar. Think of it another way: when you hand the sales clerk your credit card, what do they do? Yes, they swipe it and ask for your signature. What do they do after that? Yes, they hand you your merchandise, but they also hand you your credit card. You get it back. Psychologically, you haven’t given up anything.

Okay, so cash burns a hole in your pocket…

Try using a debit card. Make sure the checking account your debit card debits is not tied to your savings account if you overdraw your checking account; otherwise, you defeat the purpose of having your checking account balance act as a governor on your spending.

Be sure to create a safety net

This should be done parallel to paying down your debt. If you don’t have an adequate emergency fund then as soon as you pay off your debt, the car is going to need new tires. Guess how that purchase will be made? (Hint: the credit card.)


What type of credit card
are you interested in?
How much do you spend
per month?
Do you carry a balance?

About the Author

By , on Aug 25, 2011
Max Jaffe writes about getting out of debt tips for Liquid, maker of personal finance apps for iPhone and Android.

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Leave Your Comment (6 Comments)

  1. MortgagesByMark says:

    I’m a big believer in building the emergency fund first, then starting paying down the credit cards. That way if the inevitable unexpected expense comes up, you’ve got cash and you don’t need to charge it.

  2. Luis says:

    Tracking spending has become pretty easy with some online banks. My bank, USAA, shows you everything you have paid for with credit/debit cards and categorizes it too. Then it allows me to download to Excel or Quicken so I can track my spending over time. It’s very quick and easy.

  3. It really boils down to creating a spending plan based on your income and sticking to it. That way you won’t get into debt in the first place.

  4. Kira says:

    @ Bernard – if Credit Card Debt was about math we wouldn’t be in it in the first place. Who cares what motivates you as long as you do it? Nobody gets excited about paying off $300 of a $20,000 credit card because the interest on it was 9% instead of their $1500 card at 6%. Paying off debt is about motivation. The same motivation that caused us to buy beyond our means. For most people, motivation is about seeing progress. And kicking a small debt to the curb (or a lender that you really hate) is more motivation than your mathematically efficient formula.

  5. Bernard says:

    I think one thing we need to be careful with is how you pay them down…what order.

    If you use the DOLP method, you’ll figure out which of your debts, including your home, car, etc., you should pay off first.

    Often times people put more money towards their home instead of their credit cards.

    Sure, decrease your credit card debt but you should be doing it in the way that’s most efficient with your dollars.

  6. Mike Holman says:

    Great post – I was wondering about this information and thanks to your wonderful site – now I am well informed. 😐

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