Get out of credit card debt

NEW YORK (CNNMoney.com) -- You've thought about it, dreamed about it... now you can do it. Be debt-free in 2008. Here's how.

Americans were expected to charge more than $148 billion this holiday season. And that holiday debt is on top of the normal debt load we carry - almost $10,000 according to CardTrak.com.

But don't wait until all those bills start rolling in to figure out just how big of a hole you're in. You can get that info now. Go online and set up an account so you can see what those numbers are.

"If you have to borrow money to pay off your credit card bills, your credit card spending is out of control," says John Ulzheimer of Credit.com.

You'll also need to take a cold hard look at what all your debts are. If your monthly debt is between 15 and 20 percent of your income, you have too much debt and you should start paring down your expenses.

If that figure is higher than 20 percent, you may need to enlist the help of a professional.

Credit card debt is one of the most costly debts you can have. The average interest rate is higher than 14 percent. However, many people may be paying rates as high as 30 percent.

Since credit card debt is so expensive, you'll want to pay it off first. If you only pay the minimum payments, it could take you up to 30 years to pay off that debt.

If you have a balance of $9,000 with an interest rate of 15% and you only make minimum payments, this will cost you almost $7,000 in interest. And it will take you about 19 years to pay off your debt.

Wouldn't that money be better spent on a college education fund or a vacation?

To figure out how much interest you'll have to pay if you only make minimum payments, here's a back of the envelope sketch: Take your balance and multiply it by your APR. Take that number and divide it by 12. That number is how much you'll pay in interest each month - assuming you make no more purchases on that card.

To calculate out how much longer it will take you to pay off your outstanding balance if you only make minimum payments, go to mastercard.com and click on "debt know-how."

A reward card can be a beautiful thing. But remember credit card issuers team up with airlines and retail stores to entice you to spend more. If you carry a balance from month to month, what you pay in interest will likely eat up any benefit from the reward card.

And make sure that the reward is worth it. Airline miles aren't always a great deal says Ulzheimer.

If you have to spend $50,000 to earn a roundtrip airline ticket that could cost you only a couple of hundred dollars, you really have to ask if it's worth it," he says.

The bottom line here is that reward cards can be good for people who pay off balances in full and for those who use the card for business purposes.

Taking out a home equity line of credit to pay off your credit card debt can be a smart move. A HELOC has a lower interest rate that moves down every time the Fed cuts rates and the interest you pay is usually tax deductible. But make sure you consider all the downsides.

First of all, when you stop making credit card payments, the credit card companies are not going to come and take your home away from you. When you roll your debt into a HELOC, you've put your home in danger if you can't pay your balance.

Plus, in order to get a HELOC, you may need to have your home appraised. Given that housing prices have dropped dramatically the value of your home may be set lower than you expect.

The takeaway here is that throwing money at your credit card debt won't solve the underlying problem: your spending. It's far better to get control over your budget and use your credit cards sparingly.

At their essence, credit cards are 30-day loans that should be paid back in full. It's a convenience. Not a way of life. Credit cards are not a license to shop.

And although more and more people are doing this, you shouldn't put your mortgage payments on your credit card. This will just compound the trouble that you'll have down the road.