Five Steps for Ditching Credit Card Debt

Feeling Trapped?

Why make a post about credit card debt? You’d be surprised at the number of people that used credit cards to fund their business when they first started out. It seems like a dangerous game to play, but if you don’t have savings to dip into, you’ve really got limited options. Unfortunately, many of these people borrowed money at less-than-favorable rates, using multiple credit cards, and they’re now struggling to work themselves free from the debt they’ve amassed.

Kill Off Your Credit Card Debt

The biggest question is, “How do I know which of these cards to pay off first?”

Best-selling author David Bach developed a system that helps prioritize your debt payment plans. It’s called DOLP, which stands for Dead On Last Payment, and DOLPing your way out of debt is all about building momentum as you systematically pay off each card, one by one. This system can help you break free – You can get a true handle on how much you owe and how to put a payment plan into action in a matter of minutes.

Here’s what you need to do get DOLPing:

1. Make a list of the current outstanding balances on each of your credit card accounts.

2. Divide each balance by the minimum payment that particular card company wants you to make. The result is that account’s DOLP number.

For example, say your outstanding Visa balance is $500 and the minimum payment due is $50. Dividing the total debt ($500) by the minimum payment ($50) gives you a DOLP number of 10.

3. Once you’ve figured out the DOLP number for each account, rank them in reverse order, putting the account with the lowest number first, the one with the second-lowest number second, and so on.

You now know the most efficient order in which you should pay off your various credit card balances.

4. Pay as much as you can each month toward the card with the lowest DOLP number. For each of your other cards, make only the minimum payment.

5. Once a card is paid off, cut it up — but don’t close the account! Leave the account open so you have credit you aren’t using, which will help improve your credit score.

Now move the next card up on your list and repeat the process until all your cards are paid off.

Track Your Progress

Tracking which cards have been paid off is a huge emotional boost, and propels you toward future progress. Here’s a template you can use to create your own DOLP chart:
DOLP Chart

Negotiate Interest Rates

Other experts will suggest that you pay off your cards in an order based on the interest rate each card charges. I disagree with this strategy. Instead, you should contact each credit card company and try to negotiate a lower interest rate. Once you’ve asked for a lower rate, you may end up with pretty much the same interest rate on all your accounts. From there, you’d follow the DOLP method.

Stay On Top Of Your Bills

Late payments can cost you upward of $30 a month, higher interest rates of up to 30%, over-limit fees of up to $35 a month — and more stress. DOLPing your debt helps you break this cycle.

Patience, Persistence, and Progress

Although the DOLP method is simple, getting out of debt isn’t. It may take months or even years to pay off all your credit card debt. It can take twice as long to get out of debt as it took to get in it. But you can do it, and it’s worth the effort.

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