As a business owner, you know the true cost of debt. Interest charges add up quickly and take money away from other areas where it would be better spent. Hopefully, you have your business debt in order, but what about your personal debt?

Make this year the one that you finally tackle your personal debt, namely credit cards. The three biggest debts people will carry are mortgage debt, student loan debt and credit card debt. Of those, the first two are generally considered good debt with credit cards being considered bad debt. Let’s get rid of it.

Credit Card Debt

Credit card debt can quickly get out of hand and the credit card companies thrive on this. According to NerdWallet, the average household with credit card debt in 2018 had a balance of $15,561. Everything the card companies do is designed to get you to put more money on your credit cards. Cash back bonuses, introductory interest rates, airline miles, all of these credit card traps have the same goal. Getting consumers to charge more.

Sure, you can just take advantage of these bonuses and then pay off your balance monthly, but will you? The true answer is no, and credit card companies bank on this. How do you think they can afford to give these extras to you. It’s kind of like casinos. Everyone thinks they can beat the house, but Caesar’s Palace wasn’t built by people winning.

Luckily, you can get out of this debt with a little discipline and a couple of time proven techniques. Let’s take a look.

Debt Snowballing

Debt Snowballing is more of a motivational tool than anything else, but this is important when going through the drudgery of getting out of credit card debt.

With this technique, you need to lay out all of your credit card debts. List them in order of smallest to largest debts. You will then pay the minimum payment on all of your cards, except the smallest debt.

Take the smallest debt and pay as much as you can, each and every month. Do this until it is paid off and then move on to the next smallest debt. Continue this process until you are out of debt.

The benefit to Debt Snowballing is motivation. You pay the smallest debt first and then you get the satisfaction of seeing that zero balance. It helps motivate you to keep on paying the debt down.

Debt Snowballing can sometimes fly in the face of good financial sense, but it works. For example, the most productive thing to do would be to pay off the highest interest cards first but these might not be the smallest balance cards. Paying down a high balance card is demoralizing. You make big payments every month but the balance never seems to go down much. You never get the reward, so you give up.

If you are like most Americans, you need instant gratification, which is why Debt Snowballing works.

Debt Consolidation

If you have the credit rating to secure a good interest rate on a consolidation loan. this is a great way to go. The average credit card interest rate is 14.41% for existing accounts so anything that you can do to drop this will greatly help

Consolidating your debt will do two things for you.

Obviously, it will lower the interest that you pay every month. If you are carrying $15,000 in debt at the national average of 14%, you are paying $175 a month in interest. Get a consolidation loan at 5% and your monthly interest would drop to just $62.50. That is a savings of $112.50, money that could be used to further pay down your debt.

Another benefit to consolidation is that you will now, suddenly have a lot of paid off credit cards. As long as there is no annual fee, don’t close them. The increase in your available credit should give you a nice boost to your credit score in a few months. If you close all those cards, the exact opposite will happen, your credit score will go down.

Now, let’s be super clever and use that great new credit score. Use that increase in credit rating to look for an even better rate on a consolidation loan. Maybe you were not able to get a rate under 5% because of your credit card debt. Maybe you had to settle for a 10% loan rate. A huge improvement over credit card interest but you can do better now. So let’s go out and secure a new, better consolidation loan.

This Is Your Year

Credit card debt is the worst kind of debt that a consumer can carry. Interest rates are a huge burden on your budget and high debt ratios can wreak havoc on your credit score. Take some action and make this the year that you join the 40% of Americans unburdened by high interest debt.