The cost of carrying credit card debt from month to month has gotten punitive. According to Bankrate.com, it was more than 20% in May 2024. That puts a premium on eliminating that particular type of debt from your life. According to the Federal Reserve Board's G.19 report, revolving debt held by American consumers has grown to $1.3 trillion. That figure has increased by more than 37% since 2020. Some of that can certainly be attributed to those sky-high interest rates.
So how do we turn the tables on this damaging type of debt? I'd propose going back to the basics -- the ABCs, if you will -- of turning credit card debt into a piece of your personal history. Behind you, but not forgotten.
Like the ABCs, none of these tactics are new, but I thought the "back to basics" approach captured the fundamental nature of the topic at hand. Let's take a look:
Assess the Situation
The first step to getting out of debt is to understand exactly how far you are in debt. How much of that trillion-plus dollars of credit card debt is yours? Get it all out in the open by creating a comprehensive list of what you owe, required payments and interest rates. These factors will all play a key role in developing your game plan to put this menace in your rearview mirror -- or, more emphatically, to squash it.
Blackball Credit Card Debt
If every one step of your journey to debt elimination is accompanied by two, three or four steps back, things are not going to go well. It's obvious, but not easy, to realize that you've got to avoid using your credit cards to make progress. If you've got six in your wallet, remove all of them but one, and put some red tape on that one identifying it as for emergency use only. Removing the tape prior to swiping or reading the numbers on the card could cause just enough of a delay to allow you to forgo the transaction.
Another key facilitator to help you avoid adding charges to your card(s) will be to sock away $1,000 in a savings account so that in the event you hit a stumbling block, you can hit up your cash stash and not your credit card. Freeze them in a bowl of water, chop them up with scissors, shred them (all except one!), but just don't use them. And remember, once you've got a card paid off, you don't necessarily want to cancel or close it, as this could negatively affect your credit score.
Counterattack
Here, you turn good intentions and a plan into results-oriented action. Interestingly, this is a semi-controversial area among those promoting or touting strategies to rid yourself of debt. Do you start with the highest-interest card or the lowest-balance one while paying minimums to the rest of your cards? While you save interest using the highest-interest card as a starting point, you may create momentum by knocking out the lowest-balance card. At USAA, our view is to save on interest, but settle on an approach that will work for you and allow you to accomplish the mission.
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