Credit cards are useful financial tools but can get out of control with uncontrolled usage. What may seem to have been a small manageable balance has ballooned to stressful amount.
If you have credit card debt and want to pay them off quickly, try these methods to have the balances eliminated.
What often derails debt-free seekers is continuing to spend at the same rate as what got them into debt. Review your monthly expenses and determine what expenses are required (rent/mortgage, auto, insurance, utilities) and what are negotiable (eating out, subscription services, cable, cell, and discretionary spending).
Lower your monthly expenses and use the freed-up cash as extra payments on your credit card debt.
Don’t use credit cards
If you are looking to eliminate credit card debt, you’ll need to stop the reliance on credit card usage. Research has shown that spending on credit and not on cash causes us to spend twice as much on purchases. Plan to use cash on purchases as you pay off your debt. It becomes harder to get rid of credit card debt if you are still adding onto the balances.
Make additional payments
You can choose to pay double the minimum payment amounts each month or add an extra $10 to the minimum payment required. Basically the more you pay towards the debt the sooner you’ll become debt-free. If you can’t afford to make extra payments, then consider a side hustle to make extra cash.
Use the debt avalanche or debt snowball methods
These methods are based on your motivations. Are you motivated to pay down your debt one credit card at a time regardless of interest or do you want to pay off the highest interest card first? Choose the right debt payoff approach for you and know you can switch to another that might be better.
Check your monthly credit card statement
By law, credit card issuers are required to provide consumers information on credit card debt repayment. For instance, how much your debt will cost you if you continued to pay the minimum balance or how much you need to pay to eliminate the balance in three years.
Review your credit card statement and find the Payment Information Box.
Use the minimum payments from a paid-off credit card on another
If you’ve paid off one credit card, don’t save or send the payment you’d normally have sent to the creditor. Instead, use that payment to pay on other credit card balances. For instance, you completed paying off a department store card that had a minimum payment of $50. Add that $50 to the minimum payment on another credit card. So your $120 payment on credit card #2 would now be $170 with the former minimum payment on credit card #1.
Don’t close your credit cards
It might seem like a great idea to close off credit cards while paying them off. Closing your credit cards may impact your available credit which is used to calculate your credit score. You may need good credit to negotiate for better balance transfer rates, lower interest or to get a debt consolidation loan.
Be mindful of the potential impact on your credit score but keep focused on the actual goal – to eliminate credit card debt. Learn what impacts your credit score.
Lower your APR
There are ways to pay less interest on existing credit card debt. Call your creditor and ask to get your APR lowered. Let them know of your plans to get out of debt and are looking for ways to have more of the minimum monthly payments go towards the principal.
Just be mindful that some credit issuers may see this as a future inability to pay and might close off your credit card. Be very detailed in your explanation and desire.
Balance transfers are another way to lower your APR
Credit card balance transfers may be beneficial by transferring high-interest credit card debt into a lower interest rate credit card. You might have a credit card or can get approved for one with a much lower APR. Transfer the balances of the higher credit cards into the lower APR card.
Be careful not to start racking up on any new credit you obtain. See “Stop spending” above.
Consolidate your credit card debt with a debt consolidation loan
It’s often easier to imagine yourself credit card debt-free when you see a fixed payment for 3 years. Apply for a debt consolidation loan with a bank, credit union, or through a financing company. See our financial marketplace for debt consolidation options.
Be mindful not to use any of the credit made available after debt consolidation. You may find yourself with new credit card balances plus a debt consolidation loan.