8 Proven Strategies to Reduce Debt

Sara Lindberg Updated on May 3, 2019

If thinking about how to pay off your mounting bills has you stressed out and feeling like it won’t happen in this lifetime, then listen up: just because you’ve accumulated debt doesn't mean you have to live with it forever.

Here we’re going to discuss eight proven strategies that can help you start chipping away at your debt.


1. Figure out where all your money is going

It may sound obvious, but tracking your spending for one month can be an eye opener when you’re looking for areas to cut back.

Do you really watch all of those cable channels? Didn’t you see an ad for another cell phone carrier with a better plan?

Once you get a better understanding of where your paycheck is going, you can swap out pricey services for more affordable options.

You can also work on reducing or eliminating extra expenses you have in a day, such as coffee, soda, fast food, or Madden Mobile. Then, use that extra money to make weekly payments on your debt.

2. Consider the number of credit cards you carry

How many credit cards do you have in your wallet: one, two, five, ten?

In the first quarter of 2017, Americans owed $764 billion on their credit cards. If you carry any sort of credit card debt, you might want to consider consolidating and/or eliminating a few pieces of plastic.

Check the APRs and look for cards with no annual fees. Talk with your bank or card issuer about consolidating your debt and transferring balances to one card.

Consolidating allows you to streamline several debts into one payment, which can help you avoid late fees. Also, you may qualify for a lower interest rate on the new card, so be sure to ask.

If you have department store cards, pay off those balances and close the accounts. Store cards often carry a much higher APR (some are up to 24.99% APR) than the current national average for other credit cards, which commonly have a 15-17% APR.

3. Pay more than the minimum balance on your credit cards

Even paying $10 more than the minimum can make a difference when you’re paying down credit cards. If you’re only making the minimum payment, you end up paying more in finance charges over the long run.

In order to pay off the balance quicker, you need to increase the monthly payment. This allows you to apply more cash to the principal to shrink the size of your debt.

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4. Freeze your credit cards

If your wallet is full of plastic, consider keeping the two cards with the lowest interest rate and freeze the rest—literally.

It’s an old trick, but it works. Put your cards in a styrofoam cup of water and toss it in the freezer. They will be much harder to use if they’re sandwiched between a pound of ground beef and a bag of frozen peas.

5. Refinance your mortgage

If you’re a homeowner, you might benefit from a rate-and-term refinance to save money.

But before you sign on the dotted line, make sure the reduction in monthly payments is worth it. Banks and mortgage companies charge a fee to refinance, which you can pay up-front or add to the overall balance of your loan. So even if your monthly payments go down, your overall mortgage balance may go up if you don’t pay the fee up-front.

However, if you plan on staying in your home for a while, the pros of having a lower monthly payment typically outweigh any cons that come with the fee.

Plus, you’ll have more money to work with on a month-to-month basis, which can reduce your daily financial pressure and create opportunities to reduce debt elsewhere.

6. Open a bill payment account

Open a separate bank account to pay your credit card and student loan bills.

Determine how much you need to pay monthly and set up an automatic deposit from your checking to your “get out of debt” account.

7. Consolidate your student loans

Joining several student loans into one monthly payment can help you get ahead.

Not only will this simplify your payments, your monthly out-of-pocket cost could go down since you may be able to pay off your balance over a longer period of time.

8. Refinance your student loans

Refinancing student loans can potentially save you thousands of dollars over the life of a loan.

When you refinance, you’re often able to lock in a lower interest rate, which allows you to put more money towards the principal each month.

Also, you may be able to change the repayment terms to get lower monthly payments. For instance, you can go from a 10-year repayment term to a 20-year term, which drops your monthly payments and puts money in your pocket at the same time.

To learn how much you could save from refinancing your student loans, see our Student Loan Refinancing Calculator.

Published in: Student Loan Debt

About the Author
Sara Lindberg

Sara Lindberg, B.S., M.Ed., is a freelance writer specializing in business, finance, health, and wellness. She holds a Bachelor's of Science degree in Exercise Science and a Master's Degree in Counseling. When she’s not writing, Sara can be found at the gym lifting weights, running the back roads to train for her next half-marathon, and spending time with her husband and two children. Read more by Sara Lindberg

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