If you have a lot of credit card debt, you are probably wondering how you are going to repay it all.  Perhaps you have heard of credit card debt elimination plans but don’t know what it means.  Don’t worry, I will explain it all here (just ask if you have any questions).

The very first step in eliminating credit card debt is to stop spending on your credit cards.  Cut them all up now.  Don't make excuses just do it.  If you really cant bring yourself to destroy all of them, put one in your freezer for emergency use only.  And an emergency is not a new hairdo or handbag but an actual life or death situation.

The second thing you need to do is work out your financial budget.  You need to know  how much you earn from all sources i.e. your pay cheque plus any expenses you claim, tax reliefs, tax credits etc.  In short all the income coming into your household after you pay your taxes. 

Then you deduct all your essential outgoings. What is essential?  Well Starbucks or cinema treats definitely aren’t.  Essential spending is your mortgage, bills such as food and electricity, property taxes etc.  Any bills that must be paid every month go in this bracket.  Hopefully when you deduct these expenses from your income you will be left with a surplus.

Next look at your credit card debt and any other unsecured credit that you may have.  You need to set up a spreadsheet showing the total amount outstanding on each card together with the minimum monthly payment due and the interest rate chargeable. 

If you have a good credit rating and have kept your payments up to date, it is worth ringing each card company to check that you are on the best interest rate possible. They won’t offer to reduce your rate but if you call them and tell them you will go to a competitor you would be surprised what they can do to reduce the interest charged on your account.

If they decline to look at your interest rate,and you have a large balance outstanding it is worth shopping around to see can you get a better deal.  Interest charges will eat up a lot of your monthly repayments so it makes sense to get them as low as possible. Just watch out for balance transfer fees and make sure you have calculated the exact costs of the transaction.

You will have already totalled up what you need to pay in minimum payments on your credit card debts and other loans.  Say this totals $250 and you have a surplus of $300, then this extra $50 should be used on clearing your debt. 

Set up a standing order or direct debit to pay the minimum payment on each card.    Every month no matter what each card will be paid. This should cover the interest charges on each card so the amount of your debt is not increasing.  And it will also help keep or improve your credit rating.  

Now you need to decide which card debt you wish to repay first.  Some people will advocate the one with the highest interest rate and this is the most practical approach but it is not always the right one.  What do I mean by that?

Well we are human beings and we need an incentive to stick to something.  For that reason, it can often be the credit card with the smallest outstanding balance which is the best to pay off first. 

For example if you had two credit cards one with $500 dollars and one with $5000 outstanding.  It would take about 10 months to clear the first one paying the extra $50 per month whereas the second one will take forever.(for simplicity I have ignored the effect of interest).

For this reason it is often best to pay off the smaller balance on credit card A.  Once this card is cleared, you then apply the $50 you had already plus the minimum payment  you were paying to company A of say $5 to the next credit card to be cleared.  So you have reduced your debt and are now clearing it at $55 a month rather than $50.  If you get any extra funds, you could throw it at the card to clear it faster.

It is amazing how we can find extra funds when we see our debt decreasing.  This is what I mean by the statement that we all need incentives to keep us going.  How do you earn the extra money - well there are a whole series of useful hubs on that subject.

Credit card debt elimination plans work.  As someone once said a lack of planning is planning to fail.  You don’t want to be in debt for the rest of your life so take action today.

Who says your mortgage must last 25 or 30 years?  If you have credit card debt and you have a plan in place to repay it (clue - the answer to that should be yes!), then why not add your mortgage to your plan.

When your credit cards are repaid and they will be if you follow the above formula, look at using the extra money to repay your mortgage.  Get the whole family involved.  Promise your kids a huge holiday once you are debt free.  One family I know went to swim with dolphins when they cleared their home loan.

It is very easy to make additional payments on your mortgage.  Be warned your mortgage company doesnt want you to clear you debt quickly. Have you ever looked at how much interest you will repay over the term of your debt.  You are worth a lot of money to the loan company as long as you stay paying interest.

But just imagine what life would be like without that mortgage.  Early retirement becomes possible. Worldwide trips are not just a dream.  Hell, life is wonderful when you have no interest payments to worry about.

Start today and your debt free date just got one day closer.