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4 smart ways to tame debt

It may sound like a lot, but read every word of the customer agreement before signing for a new card. If you don't understand something, turn to the credit card company and ask them to talk you through it. Remember the best advocates are usually impartial, so go to a credit counselor for a free counseling session to get it explained in clear terms. If you qualify for legal aid, take the agreement to a free legal clinic.

The final tip to getting debt at the right price is to pay off your highest interest balances first. While you may see quick results by paying off lower balances, you're not looking at where interest rates are doing the most damage. Use our debt paydown calculator to come up with a very precise plan of attack.

2. Plug the leak 
If you're in debt, you've got to stop digging in order to get out. Stop charging, live within your means and change destructive behavioral patterns. "Don't use your credit card like an ATM for cash advances or to buy a hot dog and soda," says McClary. This drives up your outstanding debt ratio very quickly.

Increasingly creditors are discontinuing the monthly grace period, meaning interest starts to accrue at time of purchase. Build a savings cushion so you'll have somewhere to turn instead of the credit card when an unexpected expense pops up.

3. Ignore minimum payments 
Don't use the minimum payment as a guideline for what to pay your creditors each month. Those are set up to string out payments (and interest charges) for as long as possible. "Even paying an extra $10 or $20 per month could save you thousands on interest over the course of time, depending on how much you owe," says McClary.  Check out what extra payments can do to speed up your payoff.

The minimum payment covers interest and a tiny portion of the balance. Every time you make a payment, try to pay off the purchases you made during the billing cycle, plus interest and a portion of the balance. This will help to chip away at your balance a lot faster.

Set up a payment timetable by using our debt paydown calculator. Know that you can always fall back on minimum payment if times get tough, but strive for more.


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