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What to do when your credit card debt is bigger than your savings

With living expenses up and wages steady, having more credit card debt than savings is not uncommon. How to deal?

Scott Gamm
by Scott Gamm, MainStreet contributor (@ScottGamm)

With stagnant wages over the past three decades and the cost of living on the rise, saving money for the future is a daunting task. In fact, aside from shrinking savings, one-quarter of consumers actually have more credit card debt than savings, according to an annual survey from

If you find yourself in this boat, it’s time to shuffle your priorities.

“An emergency savings account that will allow you to handle a few financial hiccups without running up new debt should be the first priority," says Gerri Detweiler, director of consumer education at "Then you can focus on paying off debt."

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The first step is to figure out a realistic sum to save for your emergency fund. Ideally, it should be nine months worth of monthly expenses, but if you’re juggling credit card debt while living paycheck to paycheck, this isn’t a realistic goal. Even if it’s $500 or $1,000 — simply keeping a figure in mind will propel you closer to seeing that amount safe and sound in your savings account.

Once you’ve determined a savings goal, this is when you actually start saving. You may decide to save the old-fashioned way by cutting expenses, selling items you don’t need or trading in an old cellphone for cash. Alternatively, asking your bank to transfer a fixed monthly sum automatically from your checking account and into your savings account is arguably a guaranteed way to save money. Automating your savings forces you to make do with less while building up your savings at the same time.

Plus, with automation, there’s a finish line within sight  if you need to save $1,000 and you automate $150 per month, you know it’s going to take about seven months to build up that savings.

In the meantime, continue to make the minimum payments on your credit cards. Once you’ve accomplished your short-term emergency savings goal, all eyes are on your credit cards now.

Paying off the credit card with highest interest rate first will save you the most money in the long run," Detweiler adds. "If you need to see quick results, tackle the one with the lowest balance.”

The amount of money you were contributing to your savings goal should now be directed towards the credit cards. Regardless of the amount of credit card debt you have, paying double the minimum payment means you’ll be debt-free within roughly two years. In fact, the minimum payments are calculated to keep you in debt.

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And to prevent yourself from straying off course, enlist the help of various online programs.

“There are helpful online tools that can keep you motivated and give you a written plan for paying off your debt like or, Detweiler suggests.