ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Eliminate Credit Card Debt - a step by step system

Updated on May 14, 2012
Angie Woods profile image

Angie is a Science teacher with an interest in a wide range of topics.

Photo by pongky -- Creative Commons License
Photo by pongky -- Creative Commons License

Bad debt, including credit card debt, has for some people become the biggest and most relentless problem they have ever faced.

Bad debt can be like a ball and chain around your ankle which can drag you down. There is a certain stigma attached to debt problems. We often see it as a sign of failure if we cannot live up to our own expectations or the expectations of others. We shrink from the problem, trying to ignore the growing pressure, and instead create a life of stress.

Yet credit card debt can affect people from all walks of life. Anyone can get into financial trouble but, like any problem, there is always a solution.

The system presented here is a simple method for eliminating your credit card debt for good. It is designed to help you take back control of your finances and systematically get rid of your bad debts one at a time.

It is based on John Burley's (author of Money Secrets of The Rich) "Debt Terminator" and Jamie McIntyre's (author of What I Didn't Learn At School But Wish I Had) methods for debt reduction.

The Step By Step Sytem to Eliminate Credit Card Debt

This 5 step system is simple to implement but is does require you to take action and have a degree of discipline to see it through.

Step 1. Organise Your Debts

You will need to get all your debts together in one pile. This includes all your consumer debts such as credit cards, store cards and personal loans.

Step 2. Calculate a Pay-Out factor for each debt.

Now we are going to create a table of all our debts which includes the following information.

  • Debt Name (the name of the lender will do)
  • Total balance owing
  • Minimum monthly payment

Now we will calculate the "pay-out" ratio by dividing the total balance owed by the minimum monthly payment and add that to the last column.


Debt Name
Balance Owing
Minimum Monthly Payment
Pay-Out Factor
Best Store Card
BANK Visa Card
BANK Mastercard
ABC Visa
Car Loan

Step 3. Order your debts in "pay out" priority from lowest to highest

Now we are going to put our debts in "pay-out priority", starting with the debt with the lowest ratio first. We want to pay off the debt with the lowest factor first as this will be the quickest to pay out. It will help us to build momentum and see results quickly. This will give us a psychological advantage in our debt reduction strategy. There's nothing like quick results to encourage us to keep going!

Debt Name
Monthly Payment
Pay Out Factor
Best Store Card
BANK Mastercard
BANK Visa Card
Car Loan
ABC Visa

Step 4. Determine how much extra you can apply to this debt each month

This is the step that does require a little discipline!

You will need to prepare a budget to work out how much extra you can apply to the debt with the lowest factor each month. There are many resources on the Internet that you can use if you need help with this.

By deducting our regular monthly expenses from our monthly income we can calculate our surplus (hopefully you have found a surplus!) and use this for our debt reduction strategy.

For example, if you find you have an extra $200 over each month - after paying all of your living expenses - then we would apply that to the debt with the lowest factor first.

Instead of paying the minimum payment of $100 to Best Store Card, we would pay $300 a month off this card ($100 + $200 = $300). This will allow us to pay this card off in 5-6 months and we can then move on to paying off the card with the next lowest pay out factor.

Step 5. Apply the system to paying out all your bad debts

Now comes the part that requires the most discipline. Instead of spending the money you have freed up each month you will need to attack the next debt by applying the same $300 to it's minimum monthly payment. In this example we will now be paying ($300 + $300) = $600 a month off our next debt, the BANK Mastercard Card.

Once the BANK Mastercard is paid off we move on to the next debt. We will be applying the $600 + $120 minimum payment = $720 a month to the BANK Visa Card.... and so on....until all debts are eliminated.

Do I have to work out a budget?

Although it is recommended, there is another way.

As an alternative you can simply calculate 10% of your gross monthly income and apply that to the debt with the lowest factor. For example if you earn $3000 per month then 10% would be $300. Add the entire $300 to your regular payment of $100 to Best Store Card so each month you are paying a total of $400 off this debt. You will be able to pay out this card in about 3 months and then move on to the debt with the next lowest pay-out factor.

What if I can't afford 10% of my income each month?

If you can't afford to apply 10% of your gross income to paying out these debts then try to add at least 10% to the minimum monthly payment. For example to our Best Store Card we would add 10% of $100 which is just $10, bringing our monthly payment to $110. Of course this will take a little longer but the important thing is to start. If you can afford to pay a little more, say an extra $50, then start there. You can accelerate the payment in the future. Making extra payments is as powerful as building up savings. It will terminate your debt while saving you hundreds (or thousands) in credit card or loan interest over the years.

Photo by bunkerjet4, Flickr Creative Commons
Photo by bunkerjet4, Flickr Creative Commons

Don't set yourself up for failure

Make sure you are comfortable with the extra amount you decide to apply to your first debt. If you set the stakes too high you will quickly lose interest and the system will fail. You should still be able to live comfortably while gradually getting rid of your bad debt step-by-step. Congratulate yourself for taking control and celebrate your success as you move through the system with special treats that you enjoy.

Photo by: SqueakyMarmot, Creative Commons
Photo by: SqueakyMarmot, Creative Commons

This is just one strategy for eliminating credit card debt. For some people it works more effectively than consolidating debt as often people consolidate, then run up their credit cards again, which defeats the purpose.

Remember that getting into debt is a habit and a habit that needs to change. This step by step system can help you create new habits so you become the master of your finances and no longer a slave to bad debt.

You will need to get rid of the credit cards (just cut them up) to resist the temptation of more spending as you pay each card out.

"But I still need a credit card"

Consider applying for a Debit Visa Card that "debits" your purchases, online shopping and bill payments straight from your bank account. That way you can avoid over spending as you can only draw on money you have in your account.

If you insist on keeping a credit card for emergencies don't carry it with you when you go out shopping. Store it in a secure place at home. Some people have been known to keep their credit card in the freezer! That way it can't be used for impulse buying.

Does this method work for everyone?

This system outlined here is a very effective and proven method for eliminating credit card debt one step at a time. If you have a mortgage you can add that to your list and apply the same system for paying it off sooner.

However, I don't know your personal situation and this system will not suit everyone.

If you feel your debt is uncontrollable and you require more assistance with eliminating your credit card debt it is recommended that you seek professional help. There are credit counselling services, often run by churches or local councils, that can give free advice and sometimes negotiate with creditors on your behalf.


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)