Slaying the Plastic Monster

Question of the week:I've really gotten in over my head with credit card debt, and it is beginning to seriously worry me. What's your strategy for paying off credit card debt once and for all? --E.D.

Dear E.D.,

While it can be discouraging to face a mountain of credit card debt, it's important to remember that there is a way out. We heard many success stories when we asked members of the Armchair Millionaire community about their experiences in cutting their debt down to size. This one is typical:

"My wife and I got ourselves into a substantial amount of credit card debt over the past five years. It all started back in college, but snowballed out of control when we got married, went on a honeymoon and a cruise and bought a house. We learned our lesson and now have just one credit card for emergencies. So far, we have not touched a credit card in six months and are on our way to being debt free." --N.W.

The key is to systematically confront your credit card debt with sound tactics designed to accelerate your repayments and reduce the overall interest you pay. My checklist has the essential moves.

The Armchair Millionaire Checklist for Digging Out of Credit Card Debt

• Stop charging! If you can't afford to buy something without using a credit card, do without. While this may feel a bit painful at first, many people find that the things they've been buying with credit are things they really don't need.
• Double (or triple or quadruple) your payments on the credit card with the highest interest. This card is costing you the most, so concentrate on paying it off first. Once it's taken care of, move on to the card with the next-highest interest.
• Use your "extra" money. Whenever you receive "extra" income--like a tax refund, gift, or raise--commit it to credit card repayment. Since you hadn't planned on this income, you won't miss it, and those extra payments can make a big difference.
• Dig into savings. If you have some money stashed away in a low interest account (like a savings account), think about using it to pay down some debt. Your savings account is only paying you one or two percent interest, but you're paying much more than that on your debt.
• Consider finding an extra source of income. A second job doesn't have to be a huge time burden--even a few hours each weekend will earn you a nice chunk of money each month that will go a long way towards speeding up your debt repayment.
• Keep going. By the time you've paid off your credit card debt, you'll have developed a great set of money management skills. Put them to work on an investing program that will put your money to work to fund your long-term dreams.

THE BOTTOM LINE: Besides making you feel awful, debt is your main barrier to building a financially secure future. But by using some common sense techniques, you can push that monkey off your back.