Credit card debt doesn’t have to be something you go through year after year.
- To make progress on credit card debt, limit your spending and commit to a monthly payment amount.
- A balance transfer card or debt consolidation loan can also make the repayment process easier.
- If you have debt spread over multiple credit cards, set up a payment plan to decide which cards to pay off first.
It’s never a good time to have credit card debt, but if you currently have balances, it’s more important than ever to pay them off. With rising interest rates, credit card debt could become more expensive in the near future.
Getting out of credit card debt isn’t easy. I’ve done it before, so I understand how stressful and difficult it can be. But there are a few tips you can follow to at least make your job easier. They can help you pay off your credit cards faster and save money on interest charges.
1. Limit your credit card use
When you’re in credit card debt, the first thing you need to do is stop the bleeding. The solution might be to stop using your credit cards altogether and only pay with a debit card or cash. If you continue to pay with credit cards, use them only for essentials.
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One of the reasons credit card debt is so difficult to pay off is that many people continue to use their card as normal. Even when making payments, they also take a step back by adding new fees. To get out of credit card debt, you need to both pay it off regularly and keep your spending to a minimum.
2. Commit to a monthly payment amount
For this tip, you will need to know your net salary and your monthly fixed costs, ie your needs. Add up all the bills you have to pay, then subtract them from your take home pay. Depending on what’s left, you can decide how much you’ll pay for your credit card debt each month.
Let’s say your take home pay is $4,000 per month and your fixed costs are $2,500. That leaves $1,500. Knowing this, you could commit to paying $750 or $1,000 a month for your credit card debt. Leave yourself some wiggle room here. It’s important to set a realistic goal that you can achieve each month.
What is important is to commit to a specific amount. By doing this, you’re more likely to stay on track and be consistent.
3. Apply for a balance transfer card or debt consolidation loan
These are two popular ways to pay off credit card debt. Here’s how they work:
- Balance transfer credit cards offer a 0% introductory APR on balance transfers. The APR intro can last 12 months, 18 months or more, depending on the card. If you get a balance transfer card, you can transfer your credit card balances and avoid additional interest charges for the duration of the introductory period.
- Debt consolidation loans are personal loans intended for the repayment of debts. If you get one, you can use it to pay off all your credit cards. Then you can repay the loan in fixed installments.
With both options, you can get a lower interest rate on your debt, saving you money. They also consolidate your debt so you only have to make one monthly payment to one account (your balance transfer card or your loan).
To qualify for either and get the lowest rates, you’ll likely need a good credit score. You can always try to apply if your credit is not there yet. However, it may be better to wait, pay off some of your debt first, and then apply after you’ve raised your credit score.
4. Decide on a payment plan
You have already decided on a payment amount, but your payment plan is a little different. This is how you will split this monthly payment between your credit cards.
Now, if you’ve opened a balance transfer card or a debt consolidation loan, it’s easy. Since you only have one account to pay, you can simply put your entire monthly payment into that account. But if you haven’t and have multiple credit cards, a payment plan is needed.
There are two common payment methods, called snowball and debt avalanche, that you can use:
- Debt Snowball: Make minimum payments on all your credit cards and put all your extra money on the credit card with the smallest balance. Once you’ve paid off that credit card, repeat the process for the credit card with the next lowest balance.
- Avalanche of debt: Make minimum payments on all your credit cards and put all your extra money on the credit card with the highest APR. Once you’ve paid off that credit card, repeat the process for the credit card with the next highest APR.
The debt snowball is great for staying motivated because it reduces debt the fastest. Debt Avalanche saves you the most money in credit card interest, since you target the debts with the highest APR first.
Credit card debt can seem overwhelming. But if you watch your spending, make a plan, and are consistent, you could see your debt paid off sooner than you think.
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