10 Tips for Paying Off Credit Card Debt
Ready to pay off your credit card debt? It’s easy to feel stuck when you’re struggling to make minimum payments and frustrated with how far your financial goals seem to be. However, no matter how bad you think your situation is, there’s a way out that will work for you. Here are 10 practical ways you can quickly tackle your maxed out cards and take your first real steps towards getting out of debt.
4. Trim Your Expenses
Free Up Some Cash to Pay Debt Faster
Speed up your debt repayment and get out of debt fast by reviewing your monthly expenses and looking for ways to cut your costs.
Start by tracking your spending for the next two weeks to find out where exactly your money is going (one month is even better). You might be surprised to learn that making your morning coffee instead of buying a $3 specialty drink will save you over $1,000 a year!
Check your spending to see if you can find more ways to save some money. Every little bit will help you get closer to a life free from credit card debt.
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I was hesitant to make this call as I already felt ashamed about my financial situation. I was pleasantly surprised by how understanding and helpful both staff members were that I spoke with. The counselor, CCS gave me great advice and a personalized program to move forward. I highly recommend them!
7. Use the Snowball Method
A Highly Motivating and Popular Debt Reduction Strategy
Another method a lot of people like to use to get out debt is to pay off small credit card balances first. This can have a powerful psychological effect on many people because they can feel like they’re making progress sooner. This can be very encouraging and provides a lot of people with motivation to keep paying down their debt. Here’s how it works:
1. Use any extra money you can come up with to pay off your credit card with the smallest balance first (ignore the interest rates and just focus on the card with the smallest balance). Paying off this card will give you a quick win and a sense of satisfaction and accomplishment.
2. Don’t pocket the minimum monthly payment that you used to pay every month on your smallest credit card. Instead, start paying down your next smallest credit card balance with that money. You should of course throw all the extra money you can at this debt to get it paid off as quickly as possible, but the key is to free up money as you pay off your smallest credit card balances first. The monthly payments you free up will help you pay down the next smallest credit card even faster.
3. Repeat the process: focus on paying off your next smallest credit card balance using the money freed up from the smaller cards you paid off earlier. With the snowballing monthly payment this method creates, your debts will get paid down faster and faster as you go, and you’ll get more and more motivated as you pay off one card after another.
Not sure whether Avalanche or Snowball is right for you? Each has its own perks. While paying off the highest interest rates first is mathematically correct, the psychological benefit of watching your debts go away faster (even if they’re the smallest ones) can’t be ignored. Some people are motivated by numbers and some are motivated by feeling that they accomplished something and seeing that progress. You know yourself. Go with the method that you think will work best for the way you tick.
Once you’ve paid off a card, cut it up and cancel the account. Most people only need one or two credit cards.
9. A Debt Consolidation Loan
A Balance Transfer Could Also be a Good Option
When used correctly*, debt consolidation loans and balance transfers are excellent ways to get out of debt.
Consider consolidating your debts with a consolidation loan or transferring your credit card balances to a low rate credit card. However, make sure you understand the terms, conditions, any hidden fees, and the overall interest savings you should get before signing anything.
Cut up and cancel your credit cards if you choose this option. If you don’t, you might be tempted to continue using them and further increase your debt load and make your debt even worse than before.
*Unfortunately, debt consolidation loans don’t help most people. When people get these loans but don’t change the habits that got them into debt in the first place, they just dig themselves deeper into debt. To get ahead using a debt consolidation loan, make sure you track your spending for at least 2 weeks. You also need to create a budget and follow it so that you’re not spending more than you earn. Don’t become someone who needs another debt consolidation loan to pay off your first one.
There are a number of ways to consolidate your debt, and many aren’t well known. Learn more.
Get Out of Debt
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