How to Escape Credit Card Debt

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Climbing out of debt is a tedious process. You should know what to do and you should follow the correct approach. Conquering debt requires time, patience, dedication and a strategy. There is no perfect strategy to conquer debt and you must figure out what suits you best. Experts from mymoneykarma are here to share the basic approach to handle debt.

How to Escape Credit Card Debt

Assess Your Finances

When you are striving to get out of debt, you need to know your finances in and out. Critically evaluate your finances. List all your financial obligations (the amounts you owe along with their respective APRs) and monthly expenditure.

Being in debt means paying a high APR. Check out each card's APR to understand the amount you owe and accordingly chalk out a plan to reduce the debt. You could pay off the high-interest debt first to save some money on APR, or you could also pay off lower balance debts first for stress relief. Consolidate your debt and expenses and compare the amount with your total income.

Create a Budget

Create a basic budget for yourself after you have listed all your financial obligations and monthly expenditures. If you have loans or outstanding debts to repay, never stall those payments. At the same time, start building an emergency fund - a backup plan for emergencies.

Save a small amount like Rs.2,500 or Rs.3,000 every month till you have enough to support a livelihood for a few months in case of a financial crisis. Having saved enough for emergencies, channelize the rest of your money towards settling debts or adding to your long-term savings. Drawing up a budget will keep you on track and you will make steady progress towards reducing your debts.

Limit Your Expenses

Make a list of your expenses. You must have some constant expenses like rent, utilities, food, fuel, etc., and some variable expenses too. Variable expenses refer to non-essential expenses that are not mandatory for survival, such as restaurant bills, movie tickets, other forms of entertainment, gifts, etc. 

If you cut down the costs of these expenses, you will be able to free up a considerable amount of funds for repaying debt. Find out ways to trim expenses and generate more income. Learn to separate necessities from luxuries - try to live on necessities and cut down the luxuries till you have pulled yourself out of debt.

You could look for sources of extra income to help settle your debt. A part-time job or a freelance assignment could help. If you receive extra cash from IT returns, year-end bonus, incentives, or as a gift, channelize it towards settling your debt before you spend the money on something inessential.


When you are deep in debt, you must know how to handle them. You should have a financial plan. Never default on secured debts. Pay at least the minimum amount. These debts are secured by an asset or collateral. If you fail to pay on time, you could lose the asset.

Your next priority should be your credit card debts - these are the ones that have hefty APRs. The earlier you pay off, the more money you save on interests. Focus on your unsecured loans next - whether it is a student loan or a personal loan, you must make the minimum monthly payments without fail.

Refrain from using your credit card while you are already in heavy debt; don't add to your debt burden when you are already struggling to clear off existing debt. If you have a considerably huge debt, you could opt for a balance transfer card to help you tackle the load.


There are three types of debt reduction strategies: the snowball method, the avalanche method and the blizzard method. Follow the one that suits your purpose.

  1. The Avalanche Method

    This method follows a top-down approach and focuses on wiping out the highest interest debt as quickly as possible. You must make minimum payments on all outstanding balances, and then pay whatever more you can afford to the debt with the highest APR. Repeating this for a few months will surely settle the concerned debt. When the highest APR debt is paid off, use the same process on the next one with the highest APR. This strategy can help you save a lot of money on interest charges.

  2. The Snowball Method

    The Snowball method is a bottom-up approach where you first pay off the minimum balance debt and then move up from there. Just like the Avalanche method, you must make minimum payments on all outstanding balances and you will be left with some extra money. Unlike the Avalanche method, the Snowball method asks you to use the extra money to pay off the debt with the least balance. When the smallest debt is paid off, use the same process on the next one with the least balance. This strategy builds positive repayment habits and gives you the confidence to conquer all your debt.

  3. The Blizzard Method

    This method is a combination of the Avalanche and Snowball methods. You pay off the least balance debt and get a huge emotional boost and then focus on tackling the highest APR debt to save money on the high interest.

Develop Good Financial Habits

If you have landed in debt, your own poor financial choices were responsible for it. You need to rethink and carefully evaluate your past financial move to understand where you went wrong. Alter the behavior that landed you in debt to ensure that you don't repeat the same mistake.

Stick to your budget; don't spend more than what you can afford; prioritize your expenses. Once you manage to crawl out of debt, you should maintain responsible financial habits so that you don't sink into debt again.

To Sum Up

Getting into debt or getting out of it doesn't happen overnight. The whole process can be extremely time consuming and emotionally exhausting. Make your payments on time, limit your expenses and strictly adhere to your budget.

Seek help from credit counselors if needed. Check your credit report regularly. Stay out of debt.

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