According to recent Experian data, American consumers have a total average debt balance of $104,215 and approximately $6,500 of that balance is credit card debt. Those are hefty bills to add to the already spiking cost of living nationwide.
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Although managing thousands of dollars in debt can be challenging, author and financial advisor Suze Orman has plenty of practical money tips to help you wipe your financial slate clean.
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Cut Up All Credit Cards
Per Orman, one possible exception to cutting up all of your credit cards is keeping one for emergencies. However, she said not to carry it in your wallet.
“This drastic step helps break the cycle of relying on credit for everyday expenses, forcing you to live within your means,” said Dennis Shirshikov, head of growth at GoSummer and finance professor at the City University of New York. “By eliminating the temptation to use credit cards, you can focus on paying down existing debt without accruing more.”
Pay More Than the Minimum Payment Every Month
“Paying only the minimum ensures you’ll remain in debt for a long time due to accruing interest,” Shirshikov said. “By paying more than the minimum, you reduce the principal faster, reducing the interest charged.”
Orman said you must pay as much as you can. She explained that if you have a $5,000 balance at 18% interest, it will take 30 years to pay it off if you only pay the minimum payment each month.
Pay Off the Credit Card With the Highest Interest Rate First
“This method, often called the avalanche method, minimizes the amount of interest paid over time,” Shirshikov explained. “By tackling high-interest debt first, you save more money in the long run.”
Negotiate Your Credit Card Interest Rates
Orman said you should do this even if it means switching cards every six months.
“Many people don’t realize they can negotiate lower interest rates with their credit card companies,” Shirshikov said. “Lower rates mean more of your payment goes toward the principal balance.”
Understand How Your Credit Card Works
Orman said that you need to understand every detail about how your credit card works, including how the credit card company charges you, the fees and the grace period.
“Being fully aware of the terms of your credit cards helps you avoid fees and make informed decisions about payments,” Shirshikov said.
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Honor All of Your Debts Equally
“Maintaining consistent payments across all debts preserves your credit score and prevents additional fees,” Shirshikov explained. “This approach ensures that no single debt spirals out of control.”
Orman said that debts include everything from money you borrow from a relative to your credit card company.
After Paying Off One Credit Card, Apply That Money Toward Another One
“This method, known as the snowball effect, builds momentum and accelerates debt repayment,” Shirshikov said. “Each paid-off card frees up more funds to tackle the next.”
For example, if you’re paying $200 a month toward a credit card and pay it off, start paying $200 extra on another card you’re still in the process of paying off.
Enlist the Help of a Credit Counseling Service If Needed
“Professional help can provide structured plans and negotiations with creditors, making debt management less overwhelming,” Shirshikov said.
You can find a nonprofit credit counseling agency through the National Foundation for Credit Counseling.
Never Let Yourself Get Into Debt Again
Orman stresses that you must not allow yourself to get into debt again.
“Establishing strong financial habits ensures you remain debt-free,” Shirshikov said. “This involves budgeting, saving for emergencies, and avoiding unnecessary credit use.”
Once You Are Debt-Free, Apply the Money You Were Paying Toward Debts Toward Your Future
Once you have paid off your debts and regained some financial breathing room, you may be tempted to spend the extra money. However, Orman says you should look toward the future.
“Redirecting debt payments toward savings and investments secures your financial future,” Shirshikov said. “This practice can accelerate wealth building and provide a safety net for unexpected expenses.”
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This article originally appeared on GOBankingRates.com: Suze Orman’s 10 Money Tips To Pay Off Thousands in Debt
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