Have you racked up more debt than you can handle and are unsure what to do?

The good news: This problem is exceedingly common and you're not alone.

The bad news: Most people don’t know where to start. And without a game plan, it's too easy to get lost in the dark.

Keep reading for a step-by-step explanation of the the decisions you'll need to consider to help you effectively clear your credit card debt.

And, with the help of the ultimate flowchart below, you’ll have the clarity and framework to eliminate your credit card debt once and for all.

Credit card debt reduction flowchart

Some steps in the flowchart need little explanation, while others demand additional details. As you work through the chart, refer to the following descriptions.

Credit card reduction flowchart

Assess financial situation

You’re likely reading this article because you want to take control of your credit card debt. In some respects, you’ve already taken the most challenging step.

Now it’s time to take stock of your financial health. To effectively tackle credit card debt, you need to understand precisely what you're up against.

Assessing your financial situation has numerous benefits, including:

  • Understanding the magnitude of the credit card debt: Before creating an action plan to clear your debt, you need to know how much you owe. You’ll want to take a comprehensive snapshot of the total amount, the interest rates on each credit card, and any other fees or penalties associated with the debt.
  • Setting realistic goals: With a clear picture, you can produce a realistic goal and plan. Understanding your financial situation means you can avoid setting too ambitious or too lax targets.
  • Budgeting: This initial assessment stage can help you devise a budget. This budget will include your income, essential expenses, and the amount of money you can allocate each month to pay down your credit cards.
  • Prioritizing debts: You can determine which should be prioritized by listing your current credit card obligations. For many, the credit card with the highest balance is tackled first.
  • Identify spending habits: Chances are poor spending habits got you into this credit card debt in the first place. A thorough assessment can shed light on areas where you might be overspending.

Can you consolidate credit card debt to a lower rate?

Often, credit card issuers offer promotional introductory rates to attract new customers. Sometimes, the savings can be substantial, for example, 0% APR for the first 12 months.

If you can find a suitable card to transfer your higher interest rate balances to, consider pursuing it. But be aware of the rate that will apply to any remaining balance after the introductory period ends.

Can you allocate more funds toward your credit card debt?

Do you have any excess money each month? If so, think about allocating a portion toward your credit card balances.

The faster you pay off your credit card, the less interest you’ll pay over the life of the debt.

If you don’t have additional funds, see if there are any monthly expenses you can eliminate. For example, perhaps you can cancel that little-used Amazon Prime subscription.

After all, you already binge-watched your favorite show.

Have you spoken with an advisor?

When it comes to money management, professionals can sometimes offer the best advice. If you’re struggling to tackle your credit card debt, consider speaking with a financial advisor to determine your options.

Advisors offer many advantages:

  • Expertise: Financial advisors understand the complexity of financial markets, products, and investment strategies. They can offer a holistic approach to helping solve your credit card debt challenges.
  • Personalized: Working one-on-one with an advisor delivers unique and customized financial advice tailored to your needs, goals, and circumstances.
  • Accountability: Working with a financial professional gives you an accountability partner. This can encourage you to stay on track with your credit card debt reduction strategy.
  • Time-saving: Advisors can help do much of the research and legwork needed to find the best solution to your debt situation. This includes thoroughly reviewing your financial health, assessing existing credit card terms, and identifying suitable products.
  • Future financial health: Advisors can help not just eliminate your existing credit card debt but also assist in building a robust financial future. The last thing you want is to reemerge in a similar situation a few months down the road.

Can you negotiate with your credit card company?

You can sometimes negotiate with your credit card company to lower your interest rate. Alternatively, you may be able to work with the issuer to produce a more favorable payment plan.

Before calling your credit card issuers to negotiate, consider the following:

  • Prepare: Note your current interest rate, how long you’ve been a customer, and any competing credit card offers you’ve received.
  • Highlight your history: All else equal, credit card companies prefer customers with good track records. As much as possible, highlight any positive attributes (i.e., perhaps you’ve never maxed out your credit card or missed a payment).
  • Be persistent: Don’t give up after speaking with one representative. Try escalating calls to a supervisor or call back at different times. Depending on the individual, they may have greater authority to offer you a deal.

Consider more drastic measures

If you’re not making progress on your credit card debt reduction, you may need to consider more drastic measures.

  • Sell major assets: In severe cases, it might make sense to sell valuable assets to help pay down debt. For example, if you can bus to work, selling your car to raise funds might be wise.
  • Take on a second job: If your schedule permits, take on additional part-time work or start a side hustle, like selling baked goods at a market once a week.
  • Debt settlement: This process involves negotiating a settlement with the credit card issuer. For example, a credit card issuer may accept 50% of the outstanding balance instead of risking losing it all. But it’s important to realize that debt settlement can adversely impact your credit score.
  • Bankruptcy: Perhaps the most severe strategy is to declare bankruptcy. While it shouldn’t be your first choice, it can be the best option for some people. This option is typically only pursued when all other avenues have been exhausted. Before pursuing this option, you’re strongly urged to consult a financial professional.