Updated Feb 2018

Before I dive into credit card debt, let's talk about luck, personal responsibility and the role they both play in having your finances in order. I only bring this us up so we can go into this conversation with proper perspective. 

It's important to understand that often times, having your finances in order is first a matter of luck and then a matter of personal responsibility. It might be luck to get your foot in the door, but then it can become a matter of personal responsibility to not get shoved back out that door.

Let's examine the philosophies you hold and actions in your life that can help explain your credit card debt.

What are the circumstances that lead you into credit card debt?

Did you start a business that isn't going so well? Did you simply spend outside of your means? If so, why? What motivated this behavior? Was it something external? Was it something internal disguises itself as an external issue?

Understand how you got to where you are now. If you don't have a grip on this, these forces, invisible to you, can undermine what you're trying to achieve.

Knowing the circumstances that got you to where you are now is important. Because while your circumstances can be limiting, many of us are capable of changing our circumstances. Especially the lucky ones.

For those unaccustomed to flying at this altitude, self reflection is not easy. It takes a lot of work. You must be willing to do this work. You have to look at things from various perspectives. You have to be honest with yourself and what you are capable and incapable of. You might not beat the odds.  

Understanding your circumstances informs your plan to pay off the debt.

Step 1: Alter the Equation

The equation I'm talking about is the income - expenses equation. Either by luck or through personal responsibility, you have to earn more, spend less or both. 

How did you get into debt? Is it possible, through your own efforts, to get out of it and stay out of it by spending less and/or earning more?

Do you need a roommate to reduce rent expenses? Do you need to take public transportation because a new car isn't in the cards for you? Do you need to look for a better paying job? Here's the million-dollar question: How can you consume less and create more in actual and perceived wealth? This is the work I was talking about.

Step 2: Make a Plan

First, figure out how much you can afford to put towards your credit card debt each month.

Next, use a free tool like unbury.me.  Unbury.me is a loan calculator that helps you pay off your debts and create an optimized payment plan to minimize interest and get debt free as fast as possible.

It's important to make a plan first. If it's realistic, then as long as you're consistent and keep current with your plan, you'll see a light at the end of the tunnel. 

Everyone's plan will be simple and the same: every month pay more than the minimum you owe. In other words, attack your debt by using as much extra money towards paying down debt. Simple, but not easy. The tool helps make it easier.

Make a plan. Make a plan. Make a plan.

Step 3: Research Other Options

If you made a plan and it's not realistic or you want to get out of credit card debt faster, then you have a couple of options.

You can refinance your debt on your own. Refinancing your debt is the same thing as debt consolidation. You get a loan for the total amount that you owe for your credit cards.

You then use that loan to pay off your credit cards. The idea here is that you find a loan with better terms. Usually better terms means a lower interest rate or a fixed monthly payment or you get out of debt faster than you would have otherwise.

Option 1:  Refinance with someone you know

Remember that thing I said about luck? If this is you, recognize how lucky you are and exploit it. If you parents or rich Uncle Mort would be willing to refinance your credit card debt and they'll be cool about it, then that's a pretty good deal. 

Financing with a family or friend is typically the lowest cost of all loan options: no origination fee, you can ask for a lower rate or flexibility in making payments, no applications and no credit score required. But beware of the psychic tax or how this will impact your relationship.

Tips: Offer the person you're borrowing money from an interest rate. Give them loan terms. Set up an automatic payment to make sure you keep up with the payments. And if you need flexibility, communicate that ahead of time.

Option 2:  Refinance with a Personal Loan. 

Your relationship with your family and/or their financial circumstances might make a loan from them a non-option. Here are some options for a personal loan:

• Your bank. Inquire with your bank to see if you can get a personal loan.

• Other lenders:

  • Lending Club - An online, peer-to-peer lending option;

  • Payoff - These guys often charge an origination fee.

More often than not, personal loans carry fees of 1% to 6%, called origination fees. So you might end up paying less by simply tackling your existing debts in a systematic way, rather than consolidating.

Option 3:  Play the Balance Transfer Game

A personal loan forces you to pay off your debt over time. This is why I prefer it to transferring your credit card balance to another credit card.

But a personal loan only makes sense if you receive a lower interest rate than you have on your existing debt or if it helps you pay off your debt faster. Otherwise, getting a new loan to pay off an old one is just kicking the can down the road.

Keep Your Credit in Mind

You must have impeccable credit to qualify for the best rates for personal loans. If your score is 660 or above, you'll have good options. If your credit history is limited or you've got a poor credit score, you should manage your expectations right now and expect to pay rates at the higher end of the ranges advertised.

Be Consistent

Yeah, this step sucks. I know. It's all the behind-the-scenes work that needs to be done in order to have the fleeting moment of glory. Think about it. You're probably good at something. Think about that thing you're good at. 

Maybe you're freakishly good at juggling or you're excellent at your profession - writing scripts, producing music, dancing. I'm sure you have moments of glory. You know the moment. When you do that thing and people praise how awesome you are at the awesome thing you're awesome at.

But you know how you got awesome: First you were lucky . Then you showed up and did the work. You were consistent. Maybe you were talented, but mostly you just worked hard. Same thing here. Be lucky. Then be responsible.