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According to recent figures from the Federal Reserve Board, the average U.S. household owes almost $20,000 in credit card and auto loan debt. Among households that carry balances on their credit cards, the average credit card debt is approximately $12,000.

Getting into debt doesn’t take much effort. A Christmas shopping trip here, a vacation there, and an unexpected car or home repair can easily get you into debt. Credit card companies are making it easier than ever too, with the never-ending stream of credit card offers, “courtesy” balance transfer checks, and extremely low introductory interest rates.

Unlike getting into debt, getting out of debt will probably involve a lot of effort and patience. But take heart, because for most people, it is doable.

In this 5 step guide to getting out of debt, we will provide you with general, practical advice on how to get out of debt and avoid bankruptcy. To get out of debt successfully, you should (1) freeze your credit; (2) evaluate your budget; (3) reduce your interest rates; (4) snowball your payments; and (5) reward yourself.

Please understand that our suggestions should be taken as just that — suggestions. This article is not written for your specific situation. You should not rely exclusively on our advice to make any financial decisions. If you need advice for your specific situation, you should consult with a financial professional.

Step 1 - Freeze Your Credit

Just like a plumber must turn off the water to fix a leak, the first thing you must do to fix your debt problem is attack the source: your credit cards. You need to quit using credit, NOW. Do whatever it takes to make you quit: cut up your credit cards, bury them in a hole, or just plain freeze them. (Studies show it’s rather to make impulse purchases when you have to chisel your credit card out of a block of ice.)

By putting your credit cards out of commission, you’re on the road to getting out of debt. Without the ability to use your credit cards, your debt can’t get any worse than it already is. This first step may sound obvious, but it’s what stops most people from successfully thwarting debt.

With a good pair of scissors, step one should only take a few minutes.

Step 2 - Evaluate Your Budget

Now that you’ve discovered that plastic can be rather hard to cut, your next step is to evaluate your budget. (If you’re still trying to figure out how to freeze your credit cards in a block of ice, just go ahead and cut them up.)

Take a few moments to add up all your sources of income. Now, add up all your mandatory expenses (mortgage/rent, groceries, utilities, taxes, etc). Subtract your expenses from your income. That figure is the amount of money you have available to you to pay off your credit card debt.

Now dig out your credit card statement(s) for the most recent month. Add up the minimum payments for each card. If your minimum payments are less than the amount you have available to pay off your debt, congratulations — you can get out of debt.

If your minimum payments are more than you can afford, you must find a way to afford them. There are only two ways to do this: cut your expenses or increase your income. Go through all your expenses and find ways to cut back. Do you really need all those premium cable TV channels? Make your own meals instead of eating out. Living with the bare necessities won’t be fun, but it’s what you’ll have to do it until you can pay off your credit cards. Consider getting an additional job to pay off your debts.

If there’s no possible way you can make the minimum payments for all your credit cards, stop reading this article and go get expert help.

Step 3 - Reduce your interest rates

It’s no secret that the competition between credit card companies is intense. Just look at all the advertising. All this competition benefits you, the consumer. You can use it to your advantage to lower your interest rates, which could take substantially shorten the amount of time it takes you to pay back your debts.

Watch your mailbox for zero-percent or low-interest interest balance transfers, and read the fine print. Most of these offers are only for a limited period of time. If you see a good offer for lower interest-rates, don’t hesitate to take advantage of it. Just make sure you read the fine print, and are aware of any fees or restrictions.

You can also negotiate with most credit card companies for a lower interest rate. Always remember that you have the upper hand; they make more money by keeping you as a customer with a lower interest rate than they do if your leave. Call your credit card’s customer service and calmly explain that you have a better offer from a competitor. Tell them that you would love to keep their card, but unless they can reduce your interest rate, you will be forced to transfer your balance to that other card. If the customer service representative is unwilling or unable to lower your rate, ask to speak to their supervisor.

Another popular option for reducing interest rates is debt consolidation. Debt consolidation usually involves paying off your credit cards with a low-interest home equity loan. If you own your own home and have lots of equity built up, you may wish to consider debt consolidation. Some of the benefits of debt consolidation home equity loans include the ability to deduct the interest on your income taxes (with limitations) and amortization of your debt over a longer period of time. Always consult with a financial expert before opening a home equity loan to consolidate your credit card debt. Some experts believe that it is inadvisable to trade your unsecured credit card debt for secured debt against your home. Debt consolidaion has an added psychological benefit: it easier to make one large payment than numerous small payments, even if the total amount is the same.

Step 4 - Snowball your payments

In step 2, you calculated how much money you can use each month to pay off your debt. You should first pay the minimum on all your cards. After paying the minimum, any money you have left over to pay down your debt should be sent to the card with the highest interest rate. This is mathematically the fastest and cheapest way to pay off your debt.

Once you’ve paid off your highest-rate card, send that extra money beyond the minimums to your second highest-rate card. Once you’ve paid off that card, send your leftover money to the third highest-rate card, and so on. You should see why this technique is called “snowballing.” As you pay off your debts, the amount of money you send to the high-interest card builds up like a snowball.

Here’s an example: Let’s assume you have $1,000 a month to pay off your credit cards. Also assume that you have three credit cards, each with a $250 minimum payment. The interest rate for Card A is 10%, Card B is 15%, and Card C is 20%. You should send the $250 minimum to Card A @ 10%, $250 minimum to Card B @ 10%, and send the remaining $500 ($250 minimum + $250 leftover) to Card B @ 20%.

Once you pay off Card C, you’ll send $250 to Card A as before, but now you’ll send $750 to Card B. When you’ve paid off Card B, you’ll send the entire $1,000 to Card A, which had the lowest interest rate.

Focusing your payments on the credit cards and loans with the highest interest rates is the most efficient way to pay down your debt.

Step 5 - Reward Yourself

With all the scrimping and scrounging for money, it’s easy to get discouraged. To avoid getting discouraged and giving up, set some reasonable goals or milestones for your debts and give yourself a reward when you meet those goals. For example, take yourself out to dinner each time you pay off a credit card completely. If you only look at the numbers, the extra rewards won’t get you out of debt any sooner. But if the luxury of rewarding yourself makes the difference between continuing with the plan or giving up, go for it.

There you have it! We hope this 5 step guide to getting out of debt has set you in the right direction. If you have any questions, don’t hesitate to contact us. We’ll be happy to respond personally to your questions. And finally, remember to visit CreditShack often for extra money-saving tips and motivation.