How to Pay Off Credit Card Debt
How to Pay Off Credit Card Debt
I know, I know, we’ve all been there, and it’s easy to say, but usually hard to do. What’s more, all of this credit card debt didn’t appear instantly, and it’s not going to go away instantly either. We’ll try to show you how to pay off credit card debt in a reasonable time frame, but it’s very important that you have your mind set to do it.
Getting rid of this bad debt may seem next to impossible, but it is absolutely possible. If paying your bills at the beginning of the month gives you a migraine, then it’s time to tackle and beat this problem. Trying to make payments on four or five cards that are almost maxed out will give anyone a major pain.
If you’re not at the point of being ready to meet with a debt counselor, and have the income to do the job, that’s great. Just steer clear of infomercials and other solicitations that promise you there’s an easy way out if you use their services. Short of winning the lottery, there is no easy way out that won’t affect your life adversely.
Our six methods that will show you how to pay off credit card debt. There may be more, but we find that if you can follow ours, it will work, and won’t cost you anything.
6 Tips on how to pay off credit card debt
1. Pay on the card with the highest interest rate first – First and foremost, make a monthly budget if you don’t have one yet. Put your credit cards away, and stop all unnecessary charges. Make cuts in your budget where necessary to free up some cash.
Make a listing of all your credit card debts from the highest rate down to the lowest along with the current balance. Each month, or more often, put all extra cash on the card with the highest interest rate, and just make the required minimum payment on the other cards.
The folks who like to put a cute name on a method like this, call it the “avalanche method.” (Don’t ask me how they arrived at that name) Using this method of repayment will save you money on interest paid.
As an example, let’s say you have $500.00 each month to repay against your credit card debt. After making the minimum payment on the other cards, apply the balance to the highest interest rate card. Once you have that card paid in full, use the same method on the next highest rate card. This is one way some learn on how to pay off credit card debt.
The important part of this method is that you’ll save on interest paid by applying the $500.00 every month to your debt. This method of repayment works best for those who are motivated by saving on interest paid.
2.Use the snowball method – Another cute name, “snowball”. If you choose to use this method, you’ll apply all of your extra cash to the card that has the lowest balance first. This method works best for those who need motivation because this card will be paid in full quicker due to the lowest balance.
3.Possibly a balance transfer card – In order to use this type of credit card, you’ll need to have a fairly good credit score. If you were able to maintain current payments on all of your cards, you may qualify for one. These cards usually carry an offer of 0% balance transfer for a period of 12 months and up to 21 months.
During the 0% transfer period, you’ll be able to save on interest and have all of the payments applied to the principal balance. Be aware though, at the end of the promotional period, the interest rate kicks in and it could be quite high, so check this out carefully. If you decide to use this method for how to pay off credit card debt, be very careful.
If your credit cards are maxed out or close to it, your credit score probably has already taken a hit because your credit utilization ratio is high. In that event, you may not be able to qualify for a card like this.
4.Take control of your spending – This is probably the most critical issue for everyone, and often times, the most difficult to control. Those who don’t use a workable budget often don’t understand where their money goes, and experience chronic overspending.
Those who use a budget sometimes have unexpected expenses such as medical issues, high repair bills to their home or car, and even income taxes. But, a budget is still highly recommended in order that you will be aware track all expenses and cut where necessary.
Sometimes, the non-recurring expenses like car insurance, taxes, and repairs trip us up and lead to a credit card charge. This is why they need to be budgeted and monitored on a regular basis.
5.Cash is king – You knew this tip was coming. If you want to know how to pay off credit card debt, stop using credit cards. This will definitely put to an end to impulse shopping buying those really nice things that you’ll never use.
Paying with cash not only prevents more debt from adding to what you already have, but you’ll spend less in the long run.
6.Consider a debt consolidation loan – This method is nothing but a personal loan whereby you consolidate all of your credit card debt into one loan with a fixed payment. The interest rate on this type of loan is normally higher, but not as high as a credit card. The lower your credit score, the higher your interest rate.
If your credit score won’t qualify you for a debt consolidation loan, perhaps a home equity loan might be your answer.
How people accumulate credit card debt
It can accumulate through unexpected medical expenses, major repairs to home or auto, or by buying things you can’t afford with a credit card. During these ruinous times because of Covid, many others lost jobs, had hours cut, and had to use credit cards to support their families. When we show you how to pay off credit card debt, it is mainly for those who have not lost jobs or suffered other effects of Covid.