This is a guest post by Mr Credit Card from Mr Credit Card reviews US credit cards on his site and today.
If you have credit card debt (no matter how you got into it), then it is imperative that you try to reduce your debt as soon as possible. Below are a couple of ways to actually help you get started along the way.

1. Set up a budget – Yes, it sounds really simple but budgeting is the first step to getting your finances under control. The process of budgeting serves two purpose. Firstly, you can actually see what you are spending on. Secondly, once you know what you are actually spending money on, you can actually begin the process of cutting necessary expenses. The savings that you can squeeze out of your existing income can then be used to pay down your debt. You should try to breakdown your budget into at least the following categories:

  • mortgage
  • car loan
  • student loans
  • credit card debt interest
  • utilities
  • petrol
  • supermarket
  • eating out
  • school – if applicable
  • holidays
  • others
  • This list can go on and on. But you get the idea.

    2. Make sure you have enough emergency funds – Before paying down your debt, it is very important that you have money set aside for emergencies. You do not want to have no debt but no emergency funds. It is important that you set aside at least six months worth of living expenses to be able to tide your through tough times.

    3. Debt Workout Plan – The next step that you have to take is to formulate a debt workout plan. The most common method is the Snowball Method made famous by US financial guru Dave Ramsey. His method involves taking extra money and paying off your credit card debt with the lowest balance (and not the highest interest). His rational is that once you pay off one card, you get motivated and then can use the extra savings that you used to pay the interest to pay off your second smallest balance. The trick is to then wash rinse and repeat.

    The other alternative involves paying off your debt with the highest interest first. This method is more mathematically accurate because you are paying off your debt with the highest interest first (so you will pay less interest at the end of the day). But your debt with the highest interest may be the largest. Hence, psychologically, it may be harder for some folks.

    But whatever method you choose, just do it and you will be on your way.

    4. Reduce Your Interest Payments – In addition to having your debt reduction plan, you should figure out other means to reduce your credit card debt. One popular method in the US is to actually get a 0% APR balance transfer credit cards. That way, rather than paying say 15% interest, you can actually pay 0% for a set period. This will help you save money on interest payments and accelerate your snowball payments. The way to pick the best balance transfer credit cards is to get one with the longest introductory period (these days 6 months is common in the US). Try to get ones with no balance transfer fees. The other thing to be be aware of is to make sure that the card you get remains a low interest rate credit card after the introductory period expires.

    If you have other debt like mortgage or even student loan debt, refinancing or student loan consolidation would be a viable alternative.

    Stay out of debt – If you have managed to eliminate your debt, staying out of debt is another challenge. Continue to stick to a budget. If you find that carrying a credit card gives you the temptation, then perhaps you should consider prepaid credit cards, as by definition, you are not extended credit and you will not get into credit card debt.