3 Steps to Eliminate Credit Card Debt

3 Steps to Eliminate Credit Card Debt

Core Facts

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When it comes to debt, it can be debated whether there is such a thing as “good debt” and/or “bad debt.” For example, some financial planning experts would say that home mortgages and home equity loans might be considered to be good debt because debt may be tax-deductible.

But there are very few experts who would say that credit card debt is good. This is primarily because in most instances, credit cards feature relatively high interest rates. The current national average interest rate for credit cards is over 15%. Therefore, many financial planning experts recommend paying down and eventually eliminating credit card debt as a core personal financial planning strategy.

A Three-Step Plan to Get Rid of Credit Card Debt

Paying off credit card debt usually requires a certain amount of discipline, as well as a concrete plan. Consider these three steps for getting out of credit card debt:

1. No New Purchases

Commit yourself to paying cash for all future purchases or using a debit card. If necessary, shred your credit cards. 

2. Set priorities 

If you have multiple cards with balances, prioritize. There are two schools of thought here. One is to concentrate on paying off the card with the highest interest rate first, and then move on to the next highest-rate card, etc. The other is to concentrate on the card with the lowest balance first, and then move on to the next lowest balance, etc.

The first strategy will likely result in you’re saving more on interest. However, the second strategy may provide a psychological boost. Paying off a card in full can be very encouraging and can help motivate you to stick with your overall debt reduction plan.

3. Set Goals and Milestones

Determine to pay off all of your credit card debt by a certain date. Make the goal realistic—the sooner the better, of course, but if your goal isn’t realistic, you may become discouraged if you don’t achieve it.

The Next Step

Once your credit card debt is paid off, consider depositing the money you were putting toward paying off the debt into a savings account, so you can pay for future financial emergencies in cash instead of charging them. Then, once you’ve built up an adequate emergency fund, consider investing a portion of the money in a retirement plan.




Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC


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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 516-921-4200 Visit our website: www.davidlerner.com

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Jake Mendlinger
Account Manager
516.829.8374 X 232

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