I frequently post in the Wisebread forum, which is one of my favorite personal finance blogs.  Great content and a lot of excellent free info on how to cut costs, pay off credit card debt, travel for less, etc.  I’d recommend reading the blog there.

Anyway, tonight in one of the forums the topic of paying off credit card debt came up.   Here is the post from a member and my response.   This is true “Nuts and Bolts” without all of the finer details.

But here is what I have learned, people do a lot better when you give them basic concepts to follow versus every last detail.  Our minds are busy machines and we can only digest (learn) so much at any given time….

Here is the posters question…

“Where should I start to get rid of this old debt? I make enough, my wife and myself are both sick to death of having credit cards, but we just never get ahead!”

and my response:

Here is what you do.

1) Lay all the credit cards/bills out on the table and number them 1-10 (Or however many you have) Do this in order of smallest to largest balance.  This is very important.   You should include any of the bills you have, not only credit cards.

2) Then, make sure they are all current.  If not, get current (by paying at least the minimum payment immediately. ) Do not skip this step.  This is so you don’t risk hurting your credit score by slipping to a “30-60 day late”.

3)  Next, cut and/or lower every expense you possibly can.  I am not saying don’t go out to eat – But lower your bills where possible.  For example, I just signed up for Metro PCS service and cut my cell phone $40 per month.   I also canceled a land line I am not using. Trim the fat. Get lean.  Get mean.  You are now a debt fighting machine!!!

4) Once you have done that it’s on to the planning stage and time to hit the credit cards.  First pay the essential bills…(rent/mortgage, power, food etc.)

5) Then, after you have paid the bills,  take what $ is left over and attack the credit cards in this way:  Pay the minimum payment for bills 2-10 above and then apply ALL the remaining $ on Bill 1.  You do this until Bill 1 is paid off.

6)  Once bill 1 is paid off, bill 2 moves into first position and you repeat this until all the credit card debt is gone.

***This is called a debt pyramiding

What this does is create an unstoppable MOMENTUM and positive feedback loop for you as you are paying off your debt.  Although some would suggest paying off the card with the highest interest rate first, the key is to make this a habit.  And the faster you receive positive feedback, the faster this will become habit.

A feeling of progress is what will keep you going and keep you from quitting.  Without it, you may stop because you don’t feel you are making any progress.

P.S.  This can be done for all bills, not just to pay off credit card debt.

End of my response.

So, what are you doing to get out of debt?  Does this help?

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