Credit card debt can be one of the most expensive debts you can incur. On top of what you owe, interest fees, late fees, and annual fees all add up and can cause you a significant amount of stress, especially if you have other payables such as student loans. Below are a few solid strategies to help you reduce your credit card debt and may even help you towards clearing that burden off completely.
- Know Where You Stand
- Create and Manage Your Priorities
- Consider Debt Settlement
- Find a Lower Interest Rate
- Transfer Your Credit Card Balance
- Avoid Increasing Your Debt
In order to hit your target, you have to know where it is. Assess your situation and figure out how much you already owe by writing down the debt and the corresponding interest rate on every credit card that you own. This provides you with an excellent jump-off point towards creating a plan to pay these debts down.
If you are juggling several credit cards — and in turn, several balances — you’ll want to start with paying them off one by one. Choosing which debt goes first is a matter of personal priority. If you feel as though it will be easier to breathe after you’ve paid off one card completely, then start with the one with the lowest balance. If you prefer to maintain or boost your credit score, then pay off the balance on the card with the highest utilization rate first. Finally, if your priority is to pay less interest over time, then pay off the balance on the card with the highest interest rate.
If the combined balance on your credit cards is too overwhelming for you to handle by yourself, or if you’ve missed several payments and it’s become mathematically unlikely for you to repay your credit card debt on your own, consider turning to a debt settlement company for assistance. Collaborating with a company can help you clear that debt in a way that best works for you. This can be done through a single lump-sum payment or a restructured payment schedule with a lower interest rate based on your income and expenses.
Improving your interest rates can have a drastic effect on how fast you will be able to pay your debt down. Even shaving off a percentage point or two can save you hundreds of dollars. See if your credit card company has options to lower your interest rate. This may only be possible if you have a high credit score or are a long-time customer with a good payment history – that is, you’ve always made your payments on time.
If the interest rate on one card is non-negotiable, you can choose to move the balance from that card to one that has a lower interest rate. Keep in mind, though, that before you do this you must commit to pay the debt off before that introductory low interest rate window closes, which typically happens in about 12 to 18 months. You must also religiously make monthly payments on time or you risk incurring larger interest rates after the introductory interest rate ends. Don’t forget to look for hidden transfer fees, which can instantly increase your debt.
Resist the urge to rack up even more credit card debt, which will make it harder to pay off. Use cash whenever possible and make a budget and stick faithfully to it. Reduce your overall expenses by taking stock of your personal situation and cutting out things you don’t absolutely need, like that daily Starbucks run or weekly date night. Make realistic sacrifices and get creative with your alternatives. You can always make coffee at home and bring it to work in a tumbler, or stay in with your partner, or do outdoor activities that don’t cost as much as a five-course meal at a fancy restaurant.
Consistently following through these methods is key to reducing the amount of money you owe. It may take some time but keeping these in mind will help you eventually earn and save enough to be completely free of credit card debt.
To learn more about debt relief solutions and how to start living with financial freedom, contact CreditAssociates for a free consultation or use our Savings Calculator to see how much you could save.