How to Pay Down Credit Card Debt When Times Are Hard

It may seem counterintuitive to try to pay down credit card debt when times are hard. But during hard times it is especially important to maintain your credit score, keep your credit options open, protect the amounts of credit you have available, and not become overburdened with debt. In uncertain economic times, or in an economic downturn, the possibility of losing your job may loom larger. And if you are in business for yourself, you may be adversely affected by a general decline in economic activity, hurting your sales and therefore your net income. You may have to resort to your available credit to finance your necessary living expenses to get you through an especially difficult time, and it is therefore important to prepare yourself in advance, to the extent possible, and try to keep your credit card debt to a manageable level, and hopefully pay it down.

Know What You Are Spending

The first step in paying down your credit card debt is to keep it from increasing. This involves taking a look at what you are charging to your credit cards. Examine your credit card statements carefully. Do an analysis over the past several months, summarizing the types of charges you are making. This can often be an enlightening exercise. You could prepare a statement of your total charges by month, broken down into categories.

Essential vs. Discretionary Spending

Break down your credit card charges between what you consider essential expenses and those that are more discretionary. This type of analysis can be relative - what you consider essential during good times could become more discretionary during hard times, in terms of the type of expense and the amount. Your essential expenses are what you need to spend for maintaining your home, eating, clothing, health care, necessary expenses for your work such as commuting and meals, and your children's school expenses. Discretionary expenses include eating out, recreation and entertainment, and purchases of non-essential, or luxury goods.

Cash Expenses