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We currently owe a couple thousand on credit cards, but the interest is killing us. We both have credit scores in the 700's, but we have been unable to take out a loan with a lower interest rate to help pay them off. what is the best way to get credit debt paid off?

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That is a great question and thank you for asking it.  According to a March 2019 USA Today story, the Federal Reserve reported that Americans owe a record $1.04 trillion in credit card debt – up from less than $854 billion five years ago.*  I tell you that so you know that you are not alone.  Also, I want to commend you for taking steps to tackle your debt.  The sense of financial peace you will get when you are no longer feeling this burden of debt will be worth the effort you are taking.  Let me give you a few steps to help pay off this credit card debt.


Step 1:  Stop adding to your debt

To get out of debt, you must first stop adding to it.  That might require a change in lifestyle if you tend to live beyond your means.  Live by the motto, "If I don't have it, I don't spend it."


Step 2: Find out how much you owe.

Get your loans and credit card statements together and find out exactly how much you owe and at what interest rates.  This helps you gain an true understanding of the amount of debt and will prepare you for Step 5.


Step 3:  Look for extra ways to reduce or eliminate expenses.  

Most people get into debt because they are spending more than they earn.  Sometimes, it's caused by an emergency that their emergency fund could not cover.  No matter what the cause, you have to free up money in order to pay down this debt.  Where to find this extra money can be different for each person, but here are a few ways that have been successful in the past.

1.  Quit or cut back on eating out.  That one might stink for a bit, but remember that it's only until the debt it paid off.

2.  Reduce or eliminate cable/satellite.  Getting rid of all the movie channels and reducing the cable package is one great way to free up money.  You might even consider following a popular movement and cutting the cord altogether.

3.  Reduce entertainment.  Now is not the time to go to the movies and buy that $20 popcorn/drink meal when you could rent from Redbox or check out a movie from your local library, pop some microwave popcorn and put the extra savings towards debt.


Step 4:  Use extra funds to increase debt payments.  

Put the money you have freed up to extra debt payments.  The temptation might to spend it, but remember your goal.  In what order do you add those extra debt payments you ask; read on to step 5.


Step 5:  Pay down the debt with higher interest rate first.

This is where the debate comes in.  Do I pay the higher interest rate or the smallest balance first?  I am of the camp that you do which one will enable you to get out of debt.  It is true that paying the debt with the highest interest rate first will save you money in the long term, because that is the debt that is costing you the most money.  However, some people find it very motivating to pay off a smaller balance and then rolling that money into the next smallest balance. They see this progress and it motivates them to stay the course.  Whatever you choose, the key is to stay committed until the very end.  Also, while you are tackling a particular balance (highest interest rate or smallest amount), don't forget to pay the minimums due on the other cards so that you don't default on them.


Step 6:  If possible, consolidate at a lower interest rate.

I know you said you tried to take out a loan to pay them off and were not able.  If you have cards at different interest rates, can you transfer the balance from one with a higher rate to a card with a lower interest rate?  If, while considering any transfer fees, it saves you money by transferring a balance to a lower interest rate card, that means more of each payment goes to principal or to paying off the balance.


Step 7:  Once the debt is paid off, adjust your budget/spending plan

Before doing this step, I want you to celebrate having stayed the course and paid off this debt!!  Take one month of the freed up debt payments and have fun. You have earned it, butONLY for 1 month!!.  Then, you need to get back into your budget and determine what steps you need to take to avoid getting back into debt and repeating this cycle.  If you are happy with your current level of spending, you might even consider using the debt payments to fund other goals like an emergency fund or retirement savings.  If you have taken austere measures to pay off this debt, add a little back into the budget but still try to find ways to fund an emergency fund and other important financial goals.


If you follow the first 6 steps, you will get out of debt over time.  If you follow step 7, you can avoid getting back into debt.  I wish you best of luck and am excited for the steps you are taking to improve your financial situation.