Does each new credit card statement add to your remorse for overindulging this past holiday season? You’re not alone. Holiday shoppers charged an average $1,150 on cards this season, according to Money Management International, a nonprofit agency offering financial and debt-management advice to consumers.

You want those charges gone before summer vacation rolls around, right? Organizing your finances will help you meet this goal.

Here are some of the more frequently asked questions from Bankrate’s virtual mailbag, with answers from our experts to help make your summer getaway dreams a reality.

What is the best way to pay down my high credit card balance?

Always pay more than the minimum amount due. Make huge monthly payments to pay the cards off as quickly as possible. It won’t be easy.

To help you do it, here are 10 steps to help you free up cash with temporary lifestyle changes. Use the money saved to pay off your cards.

  • Stop spending money on nonessentials. No new clothing, shoes, jewelry, expensive gifts, CDs or other toys until you pay off the debts.
  • Stop using plastic. Resist temptation by making your credit cards inconvenient to use. Try freezing them in a block of ice.
  • Declare a moratorium on travel and expensive entertainment. The library and local forest preserve provide free entertainment. When you make the debt disappear, Disneyland will still be there.
  • Cut telephone expenses. Make fewer long-distance calls, and get rid of expensive cell phones.
  • Spend less on groceries. Try meatless meals and generic brands. Shop with a list.
  • Spend less eating out. Until you shed your debt, shun fancy restaurants — even on birthdays and anniversaries.
  • Conserve everything. Use less water. Drive less. Turn off lights. Lower your thermostat in winter, and raise it in summer.
  • Bring in as much cash as you can. Work overtime, moonlight and sell stuff you don’t need.
  • Keep busy so you’re not tempted to spend. That overtime will take up part of your free time. So will going to the gym more frequently and taking your children to the playground.
  • Pay off the highest-rate card first. Debt gets paid down faster when you retire the debts in order, from highest interest rate to lowest. In your case, make the minimum payment on the 8.5 percent credit card debt each month; use all of the extra cash you have, including the money from the belt-tightening, raises, bonuses, tax refunds and other sources to pay down the 9.9 percent card to zero. Then switch to the 8.5 percent card.
  • When you pay off both cards, retire the one with the highest interest rate and keep the other on (or in) ice. Use it only for emergencies.

I’m ready to pay off credit card debts by making more than the minimum payment each month. How do I create a credit card payment schedule?

Gather this information on your current credit card payments:

  • the credit card balance
  • the interest rate
  • how your minimum payment is calculated, what percentage of your total balance?
  • the minimum payment amount
  • the fixed payment you can afford to make each month

Select a payment schedule based on either the credit card company’s minimum payment or the higher fixed payment you are committed to making each month.

Anyone who is currently making the minimum payments on a credit card should take advantage of this powerful tool. You may suspect that you’re doing yourself a disservice, but you will experience an epiphany when you actually see the numbers with your own eyes.

Let’s say someone has a credit card balance of $10,000, an annual interest rate of 18 percent and a minimum monthly payment of 2.5 percent of the balance. Suppose he stopped charging on the card and paid the ever-descending minimum? What if he kept paying the current monthly payment of $250, or even upped it to $350?

Monthly payments
Monthly payment Number of years to pay off balance Amount of interest he would pay
Minimum (currently $250, decreasing a little each month) 31 years + 10 months $14,615
$250 5 years + 2 months $ 5,386
$350 3 years + 2 months $ 3,156

Some truths are self-evident: Paying the minimum monthly payment is enormously profitable for the credit card company and very expensive for the credit cardholder. That’s why the minimum payments are set at such low rates.

Once you grasp this truth and get mad at the credit card companies for milking you dry, you’re ready for the next step: working on getting those balances paid off as quickly as possible.

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Is tapping home equity a good solution for paying down our debts?

In a recent story, “Loan consolidation: No!” we reminded readers why they should keep their cotton-pickin’ paws off their nest eggs. When living beyond your means is the problem, changing spending behavior is the solution; not tapping home equity.

Getting out of debt is a slow, steady, one-day-at-a-time process; there’s no magic pill and no quick fix.

Getting out of debt

Your debt burden keeps growing because you spend more than you earn. Here’s how to turn the tide:

1. Swear off debt: If the pull to use plastic is too strong to resist, get help. Try Debtors Anonymous, a 12-step program fashioned after Alcoholics Anonymous. It encourages and supports abstinence from unsecured debt — one day at a time.

2. Stop burning cash: Put yourself on an austerity program. Here’s a slew of money-saving tips to get you going.3. Bring in more money: Find a new job. Work overtime. Moonlight. Sell stuff you don’t need. Encourage kids to work.
4. Take your head out of the sand:
Have these financial facts at your fingertips and update the data each month:

  • Cash flow: Know what came in vs. what went out each month.
  • Net worth: Subtract what you owe from what you own (home, car, investments, savings).

Compare the numbers with prior periods, and figure out ways to improve them. Post the numbers on your refrigerator, so you’ll be reminded to think about them every day.

Consumer Credit Counseling Services

If you’ve tried everything, but simply cannot get rid of the debt by yourself, consider contacting Consumer Credit Counseling Services (CCCS). This nonprofit organization offers counseling, education and debt-management services to overzealous consumers who have more debt than money.

For more on CCCS and what it does, check out ” What to expect in credit counseling.”


CCCS counseling is usually the last stop before filing for bankruptcy, and it’s voluntary. If you believe it will take more than one lifetime to pay off your debts, you can go directly to bankruptcy court for relief.

Expect this to change later this year when the pending Bankruptcy Reform Bill is passed. Credit counseling will still be the last stop before filing for Chapter 7 or 11 bankruptcy, but it will be mandatory. You’ll have to meet with a credit counselor before you’re able to tell your troubles to a judge.

I’ve used my credit card before and paid off the balance. I always make my payments on time. This time my balance doesn’t seem to be going down at all. On my last statement, out of a $202 payment, only $2 went toward paying down the outstanding balance. What exactly is my credit card payment paying?

Your statement should show you the amount of finance charges and other fees for the billing period.

If your credit card has an annual percentage rate of about 18.9 percent, and all of the $200 went to finance charges, that means that you have an outstanding balance of about $13,500. (See the worksheet below for an example.) If that truly is the case, then you don’t get to sing the blues about your $202 payment not paying down more of the outstanding balance.

Finance charge worksheet
A. Average daily balance
B. Annual percentage rate
C. Daily periodic rate
D. Days in billing cycle
E. Finance charge
(A x C x D)

Another reason why you aren’t making a dent in paying off your debt is that late fees or over-the-limit fees may be eating up your monthly payment. Pay on time, and keep your credit card balances far enough below your outstanding credit limit that finance and other charges aren’t going to put you over your credit limit.

Bankrate’s Credit card calculator: The true cost of paying the minimum can show you what you need to budget every month to get that debt paid off in a reasonable time.