According to the latest statistics from the Federal Reserve, Americans have a total of $970 billion in revolving debt. The vast majority of this debt is on credit cards. To put this in perspective, this amounts to an average of about $9,600 for each household with credit card debt.
As someone who had to claw his way out of tens of thousands of dollars in credit card debt, I can attest that revolving debt can wreck a family’s finances. First, credit card debt is expensive. Even “low interest” cards typically carry rates north of 10%. And many cards charge 20% interest or more. These interest charges add up fast, costing thousands of dollars.
Second, the payments required just to keep your debt in check will limit your options. Rather than saving for a home, retirement, or a child’s education, a large chunk of your funds are going toward paying off your cards.
Third, it makes handling emergencies very difficult. With no credit card debt and a healthy emergency fund, the unexpected car repair is easily handled. But with lots of debt, an emergency expense typically results in more debt.
Finally, accumulating a mountain of debt will hurt your credit score. An important factoring in calculating your score is the amount of your available credit. With high balances on your cards, your limited available credit will bring down your FICO score. With a lower score, all credit becomes more expensive, including interest on mortgages and car loans.
Resource: How Is Your FICO Score Calculated?
So, that’s the bad news. The good news is that you can get rid of your credit card debt. It’s such an important step on the road to financial freedom, that we have dedicated an entire week’s worth of articles to help you conquer your card. Over the next five days, I encourage you to tackle one of the articles below. Each of them is packed with information, tips, and resources that will help you get out — and stay out — of credit card debt.
Here are the topics:
Day 1: Stop Charging On Your Credit Cards — While this may seem “obvious,” the key is to actually do it. We all know that the first step to becoming debt-free is to stop going into more debt. But how do you actually do it? This article answers that question.
Day 2: Reduce Your Credit Card Interest Rates — There are a number of ways you can reduce the interest rates on your cards, even down to 0%. By lowering your rates, you reduce your interest costs and reduce the time it will take you to get out of debt.
Day 3: Use the Debt Snowball — For those with balances on multiple cards, this article covers how you should tackle your debt. It discusses which cards you should pay off first, and how you should apply in extra cash to your credit card debt. We’ll also cover how following Dave Ramsey’s advice could cost you thousands of dollars.
Related: Dave Ramsey Is Bad at Math
Day 4: Free Up Extra Cash — Nothing supercharges your ‘crush debt’ campaign like paying more than the minimum payment. The hard part is coming up with the extra cash. This article gives you ideas on how to do just that.
Day 5: Avoid These Mistake — Don’t let all your hard work go to waste. We’ve seen folks make great progress on their debt, only to see everything go up in smoke because of some common mistakes. We cover these mistakes in this article and how to avoid them.