Most people sign up for credit cards and make charges to those cards without even really knowing how much they’ll end up paying for an individual item. If you have a $10,000 balance and pay the minimal amount, likely 2.5 percent, you’re going to be paying way more than you think.

Paying the minimal amount each month would mean it may take over eight years to pay off the $10,000 balance (452 months to be exact), and the interest alone would cost around $19,000, which comes to around $30,000 for a $10,000 debt.

In fact, paying around $250 per month would take 67 months and that’s only if you don’t buy anything else during that time period. Even then there would be an additional $6,000 balance to pay off in interest.

There are three simple ways that we worked to beat our credit card debt…

Organize Your Debts On Paper

The first step to paying off a credit card, or a series of credit cards, is to get organized. This could mean getting out a pencil and paper, or creating a spreadsheet on your computer. Make sure to include things like debt, payment date, interest rate, and then prioritize the information accordingly.

There are also free spreadsheets for paying off debts, but generally speaking, the best place to start is by paying off the card with the highest annual percentage rate (APR), as it will be the one that costs the most overall.

Cut Up Cards ( Switch to Cash Only)

There’s no way to overspend by carrying cash only. If you go out and you don’t have the money to spend, then there’s no way to spend it. Pretty simple, right? This is a quick fix for anyone who spends more than they have on a regular basis.

To take this step a little further, consider Dave Ramsey’s Envelope System. Ramsey is known for helping others get out of debt and this system is a great place to start as it is simple and easy.

Basically the system involves writing your different expenses on envelopes and then putting cash in those envelopes. Then you can see how much money you have in each category by looking into your envelope, which will help you make a proper budget for the month.

What’s nice here is that you don’t have to save up any huge amount of money to start using this system. If you budget $500 per month for groceries, then that’s all you have for groceries. This means that if you get paid twice a month, take out $250 per check and put it in the grocery envelope. It’s that simple.

Refinancing

For me, it’s a little difficult and somewhat nerve-wracking to deal with cash but after we created a budget, we decided to refinance several credit cards by getting a single personal loan with a lower interest rate. Some companies offer to refinance credit cards on personal loans with rates in the mid-single digits where a credit card may be around 21 percent.

This also cut down on the various accounts and made the process less complicated overall. Rather than having to pay off several small balances on different days of the month, I could focus on one minimal amount and then pay off more than the required amount each month to get out of debt quicker.

Again, by simply choosing an account with a lower APR, I also saved thousands by simply making this move even if I had chosen to stick with the minimal amount for payments each month. Since everyone’s personal loan offer will be different, make sure to visit a few local banks and even check online options for a the best APR.

Where to Get Started

No matter how much debt you have, the time to start paying off those debts is right now. Waiting longer will mean tens of thousands of dollars if you aren’t careful and don’t get started right away.

Begin by organizing your debts on paper or with a spreadsheet. Write down all of your credit card amounts with their APR and your budget. Then consider options like the envelope system or refinancing your credit cards to a single debt. Since the first step is research, there’s no reason not to get started now.

Whichever method you choose, the key is to stick with it. Take some time to break down the numbers rather than swimming in an abyss of debt. What gets measured gets managed and the best place to start is right now.

Sources:

1) https://www.iwillteachyoutoberich.com/blog/pay-off-your-credit-card-debt/

2) https://www.daveramsey.com/blog/envelope-system-explained

3) https://lendedu.com/blog/best-personal-loans

4) http://www.bankrate.com/banking/what-banks-offer-personal-loans-2/