Tips for Handling Credit Card Debt
According to a report released near the end of 2019, the average credit card balance at the end of September 2019 was $4,240. This same report stated that this amount may increase to $4,465 by the end of 2020, and this number doesn’t take the current financial crisis into account. The current economic reality will likely mean that overall debt loads will increase.
Credit card debt can be very difficult to pay off. One of the main reasons why is because credit card companies tend to charge high interest rates. This means that, unless you pay your balance in full every month, you’ll be charged quite a lot of money in interest each month. The longer you take to pay off your credit cards, the more you’ll end up owing. In fact, if you only make small payments each month, you could wind up paying as much in interest as you do on the principal debt (if not more)!
Since credit card debt can be such an expensive problem – and one that is difficult to solve – many people find themselves looking for tips on how to handle credit card debt. Here are a few that may help you get your credit card debt situation under control.
Pay More Than the Minimum
As mentioned, making only small payments on your debt results in you staying in debt for a very long time and paying a lot of money in interest. If you’re only carrying a balance on one or two credit cards, try to pay more than the minimum on each one each month. Even a small increase can have a big benefit. (If you have more than a couple of cards or if one card charges significantly more interest than the rest, you’ll need a different strategy. This is discussed below.)
It’s worth it to try to cut expenses to put more money towards paying off your credit card debt. Look at your budget and see where you can reduce spending. It might be stressful, difficult, inconvenient, or even painful to significantly cut your budget now, but it will be worth it in the long run. The more you can pay towards your credit card debt now, the less you’ll end up paying in interest over the life of the debt.
Talk to Your Creditors
When you’re facing debt troubles, talking to your creditors may be one of the last things you want to do, but it can be beneficial. Contact your creditors and let them know that you want to pay your credit card debt, but that you’re having trouble. If you explain your situation clearly, they may be willing to decrease the amount you’re paying in interest or give you more time to pay, which will reduce the size of each monthly payment.
Have a Strategy
It’s important to have a strategy when you’re dealing with credit card debt, especially if you have several cards. If you focus on the cards with the highest interest rates, you’ll save money long-term.
Look at how much interest you’re paying on each card and figure out which one is costing you the most each month. Then, focus your efforts on paying this card off as quickly as possible, while making sure you don’t miss payments on the other cards.
While paying the minimum balance on a credit card isn’t generally recommended, you may want to consider paying only the minimum on all of your cards except the one with the highest interest rate, so you can pay off your most expensive debt first. This will save you money overall.
It can be tough to stay motivated when you’re dealing with credit card debt. One way to keep yourself inspired is to break the process down into various smaller milestones. When you reach a certain milestone (such as reducing your debt by a certain amount, paying off a particular card, etc.) you can give yourself a small reward. This can help you stay focused and motivated.
Stop Using Credit
Paying down credit card debt is difficult enough at the best of times. You don’t need to add on additional debt while you’re at it. Stop using credit as much as possible while you’re working on paying off your debt. Whenever you can, use cash for purchases.
This requires more planning, but it will keep you from spending more than you can afford and helps keep your debt stable, which makes it easier to pay off.