When it comes to credit-card debt, there are about as many approaches to eliminating it as there are banks that issue credit cards. In the end, though, only one thing matters:   You must form a plan, and then utilize that plan to systematically reduce, and eventually eliminate, your debt.

That's it:   Plan.   Reduce.   Eliminate.

Widely-popular financial planner, author, and radio host Suze Orman, in her book The Courage to Be Rich, lays out a twelve-step checklist to help readers overcome their credit card debts. While Ms. Orman's plan represents a more mainstream approach than that of other financial planners — Dave Ramsey's "Baby Steps" plan, for instance, recommends paying off credit cards by order of balance outstanding, from smallest to largest — her work reflects a keen insight into the mental obstacles that befuddle so many people in their quests for financial empowerment. She also offers a slightly different view of the benefits of "owning up" to one's poor financial decisions — and the resulting poor financial position that stems from them.

Suze Orman: Her 12-Step Program

While not everyone may agree with all of Ms. Orman's methods here, it cannot hurt to examine an alternative route to debt elimination. Perhaps one or more of these steps will trigger an "a-ha!" in your own planning, and prompt you to plan for factors you might not have considered previously.


You must face the enemy:   Tell others about your debt.


Hidden debt costs more than money. It directly results in worry, diminishing self-respect, and the need to create and dispense half-truths and outright lies in order to maintain the status quo. If you cannot face your debts (and this includes knowing exactly how much you owe to all parties) and account for each one realistically and on paper, then your chances for financial success are limited. Taking responsibility for your debts means disclosing your situation to all concerned parties, whether they're family members, friends, or otherwise. (Check my blog entry entitled "Making Your Debt Known" for a little more on this.)


If you're in "over your head" with credit-card debt, cut up your cards now. If necessary, keep one card for emergencies.

The single best way to avoid temptation is to remove it entirely. Destroying your cards will require courage and willpower, but then again, so will paying them off − except that this way, you will remove the possibility of further financial damage. Counter the discipline you were lacking previously with stronger discipline and willpower now. Get rid of your cards. If you must keep one card, don't carry it in your wallet or purse.


Call your one remaining credit card company and ask them to lower your limit to a level that's adequate for emergencies — and nothing else.

If you've decided to keep one card, understand that you can tell yourself "I won't use this, I won't use this, I won't use this," all day long, but you're still leaving yourself vulnerable to further unnecessary debt. Do as much as you can to assure that this won't occur.



Pay as much as you can each month — and always pay more than the minimum.


Wanna fill up your credit card company's coffers? If so, then just sign, stamp, and send the required minimum payments. You'll allow someone else to profit from your debt for decades to come. For instance, suppose you have a card with a $1,000 balance and a 15% interest rate. Your monthly minimum payment is 2.5% of the balance, or about $25. Start paying that in October of 2002, and you won't see a $0 balance until late 2011. That's 129 months, or almost 11 years. And you will have paid almost $760 in interest charges in that time. So it turns out that you paid $1,760 for a batch of services or goods that stickered for $1,000 and which, after 11 years, are probably now worth pennies on the dollar − if you even still own them. How painless are those minimum payments now?



Pay off the card with the highest interest rate first, and the rest in descending order.


This is probably the most commonly-followed practice: Pay off the credit cards first that are costing you the most per dollar of debt per month.



Always manage your cards to provide the lowest interest rates, switching cards every six months if necessary.


If you decide to undertake this practice, be very careful. It's easy to forget when the low-rate period is up. When that happens, it usually means you're about to pay a hefty make-up rate for the remaining balance. Also, this practice means more companies are going to make inquiries for your credit report. And you'll have to remember to close out zero-balance cards after you've tranferred the balances away.



Make a point to understand all the inner workings of your card(s) − fees, grace periods, everything.


Practically every card is different in the way its fee schedules are set up and the way it computes interest. Grace periods also vary from credit card to credit card. It pays to know how, and when, you're being charged.



Honor all debts equally − whether you owe the money to Mastercard or a family member.


Respect yourself, and your debtors. Responsibility does not end where bloodlines begin.



Once you pay off one card, you must apply that card's payment toward your next highest-rate card.


Suppose you were applying $200 per month toward paying off your ABC Bank Visa. Now it's paid off, and next on your list is your XYZ Mastercard, to which you've been making payments of $70 per month. "Snowball" the payments and begin paying XYZ $270 per month, and you're really making headway. If your final card is a PlastiKing Discover that's been absorbing $80 per month from you, then once your XYZ is paid off you will contribute $350 toward eradicating the Discover debt. Chances are it'll be zeroed out before you know it. And the card companies will call you a "deadbeat" because you're no longer paying them anything. And being that sort of "deadbeat" is a great, great feeling.



If you really cannot accomplish this yourself, enlist the aid of outside agencies.


Consumer credit counseling services are out there for a reason. If you absolutely need help, get it.



Make sure to never let this happen again.




Once all debts are paid off, apply the payment money toward your future.


Now you're debt-free. Unless you plan otherwise, the money that's been going toward paying off your credit cards will more than likely just find itself "absorbed" into your everyday, run-of-the-mill expenses. And that does nothing to benefit your future, which is why you wanted out of debt in the first place. So find a place where that money can go . . . and grow . . . every month. This is how a dark financial past is quickly overcome.