Top five strategies for paying down your debt

couple looking worried over billsWhile some of us fantasize about cutting up our credit cards and bidding good-bye to them forever, that's not a realistic scenario. Unfortunately, those tempting pieces of plastic can make it all-too-easy for you to fall into bad habits and rack up hundreds or even thousands in unwanted debt.

We've already told you how to whittle away at your debt quickly, but what if you're ready for the long haul of eliminating your credit card debt? We got on the phone with financial experts to ask for their best advice for setting up a fiscal fitness plan. Keep in mind, just like shedding unwanted pounds, getting rid of that debt takes time and discipline, so stick with it.

1. "Step one is to round up all your credit cards and find out in aggregate how much you owe," says John Ulzheimer, directer of consumer education for "There's no point in trying to solve the problem until you have a full understanding of it."

So no matter how scary it seems, you need to know how much you owe. And while you're looking at those statements, see what your APR is on each card. Rank them in order: highest, next highest and so on. This will come in handy later.

2. Stop using the cards. Not to belabor the diet analogy, but if you spend a half hour on the treadmill and then hit the drive-thru for a Superfatty Combo Meal, you're not going to fit into your skinny jeans anytime soon. When it comes to being financially svelte, experts say the first step is to draw up a budget that doesn't include using your credit cards. "Certainly, aggressive budgeting is the cleanest way out of the debt," Ulzheimer says.

"People typically don't track their spending," points out Gary Thurber, assistant director of community relations for Consumer Credit Counseling Service of Central New York. But you should do it to find out exactly where your money's going. "Do it for 30 days, one full cycle," Thurber advises. Track how much you make and how much you spend on everything from coffee to cable TV.

3. Pay one off. Experts have varying opinions on exactly how to tackle this. One school of thought says to pay off your smallest balance first, so you can get it out of the way and have a feeling of accomplishment. Another says to pay off the card that's closest to being maxed-out first, since the change in your utilization ratio can give your credit score a boost.

Most of our experts, though, agree with Ruth Susswein, deputy director of national priorities for Consumer Action. "If you have balances on more than one card, put the most money toward the higher rate card," she advises. After all, why pay the bank more than you have to? Once you've paid off that card, however, don't close the account, Susswein says. That unused credit will help boost your FICO score over time.

4. Pay more than the minimum. You can thank the CARD Act for this: Now, your extra attempts to put more toward your outstanding principal go further than ever before. "Each dollar above the minimum can save you two dollars in interest," says Kathleen Day, spokeswoman for the Center for Responsible Lending. "If you pay even a little bit more, it carries a much bigger bang for the buck in your favor."

If you can do this before you've paid off your first card, even if it's only a few bucks a month, great. If you have to wait until you've paid off that first card, put the amount you were paying every month on that now-paid-off card toward your debt with the next-highest APR. "Any money you can free up, go back and look at that budget," Thurber advises. While it might mean curtailing your day-to-day spending for a while, putting any extra funds toward your debt will help erase it that much faster.

5. Know when to get help. "If the debt is significant and aggressive budgeting doesn't work, ask for help from a nonprofit credit counselor," says Ulzheimer. "If you can sign up for one of their debt management plans, within three to five years, your credit card debt should be completely gone." Don't opt for a debt consolidation loan; the temptation to hit the cards again after you've taken on an additional obligation might be too great. Also avoid debt settlement firms

Finally, our experts had a few other pieces of advice for digging yourself out of debt: Turn down your card issuers' offer of overlimit protection. "That's a way to avoid further debt," says Susswein. "Don't give yourself that luxury."

In terms of your daily spending, be diligent about revisiting your budget regularly, maybe on a monthly basis, to make adjustments. For example, if the price of gas goes up, you'll need to find another place to trim.

Finally, if you're not in default, keep making your minimum payments on time. Going into default opens you up to higher penalty APRs and a whole host of fees, which is what you want to avoid while you're hard at work erasing your debt.
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