by Ken Spitze

Created on: March 20, 2009   Last Updated: October 18, 2010

Credit cards are useful tools, but they can also cause serious problems. Their ease of use is both their greatest advantage and their greatest danger. In poor economic times, more and more people find themselves with mounting credit card debt. Most people know it is a bad thing, but often feel powerless to do anything about it.

When you find that you have multiple credit cards with outstanding balances each month and yet want to try to get out from under the debt, what should you do? The first thing to realize is that you have to make a change there is no magic.

How can you solve this problem? I think the most important thing to realize that you have to have a plan. In all probability, it was lack of planning that caused the problem. And to have a plan, it's important to know where the money is going. So to make and implement a plan, you first need to start keeping track of spending. This can easily be done with free software or simply with a spreadsheet. If you don't have a computer, then just use paper and pencil - that worked for centuries before the advent of personal computers. In any case, don't be tempted to go buy an expensive software package!

You will probably find that the very act of recording your spending helps you start to control it. Then, after the end of a month, you can see how little daily purchase mount up. Look at your income and your expenditures. Did you make more than you spent? If not, then look at ways to cut expenses every day. You'll need to get expenditures below income in order to start paying off credit card debt. When you record expenses, be sure to include credit card interest payments when you see what you are paying in interest each month, it will help give you some incentive to pay down the debt!

Once you have spending under control, look at the interest rates that you are paying on each credit card. Begin to make as large a payment as possible on the card with the highest interest rate. This will have a compounding effect over time as you pay off the debt, you will be saving in interest payments.

Continue to make minimum payments on all cards and the largest possible payment on the one with the highest interest rate. Gradually, you will get your situation under control. But continue to record your expenses and spend a few minutes each month trying to find things to reduce.

One final piece of advice: when you get your credit card debt paid off, start to set aside money into an emergency fund. It is often an unexpected expenditure that starts one down the path to spiraling credit card debt.

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