Tips for Paying Off Credit Card Debt
It can be very tough to pay off large amounts of credit card debt. Credit card providers charge large amounts of interest on these debts, so if you only make the minimum payment, you’ll end up paying a lot more than you initially borrowed. It will also take you a very long time to pay off your debts.
Many people who are dealing with significant credit card debt get discouraged by their situation. However, paying off credit card debt is possible. Here are some tips.
Set a Goal
Look at your budget and determine how much you can afford to put towards your credit card debt each month. See if there’s any place where you can cut your spending or reduce your costs so that you’ll have more to apply to your debt. Remember, any dollar you can apply to your credit card debt now will be worth it in the long run, since you’ll spend less money on interest.
Once you have this number in mind, use this as your goal. Set up a plan and create a budget that allows you to reach this goal.
Stop Adding on More Debt
It’s difficult to pay off credit card debt. Paying off credit card debt while you’re still adding on new debt is nearly impossible. While you’re focusing on paying your debts, do whatever possible to avoid using your credit cards. This will mean you’ll need to stick to your budget very carefully and track your spending to ensure you’re staying on track.
Use a Strategy
If you owe a lot of credit card debt on several different credit cards, it might be beneficial to approach paying this debt strategically. While you could make equal payments on your debt each month, this may not be the best way to handle your debts.
There are two common strategies that many people use to pay off credit card debt:
- The Debt Snowball Method
- This method involves focusing your debt repayment efforts on the credit card with the smallest outstanding balance. Make the minimum payment on each card, then pay as much as you can on the card with the smallest balance owing.
- While making the minimum payment is usually not recommended, it can make sense to do it if you owe money on several different credit cards.
- The theory behind this strategy is that you’ll pay off the card with the smallest balance the most quickly, and this will motivate you to keep going. Once you’ve paid off the smallest balance, turn your attention to the next-smallest and so on.
- The Debt Avalanche Method
- In this method, once again pay the minimum on each card. Then focus the remaining money you have available on the card with the highest interest rate.
- This strategy will help you save money, since you’ll get rid of your highest interest debt first.
- Once you’ve paid off the debt with the highest interest rate, move on to the card with the next-highest rate.
Depending on your situation, either of these methods could be right for you. Look at your situation and commit to using the strategy that makes the most sense for your circumstances.
Talk to your Creditors
Sometimes, when you’re struggling with tax debt, the last thing you want is to talk to your creditors. However, doing so can potentially be very helpful. In some cases, if you contact your creditors and explain your situation, they may be willing to help make it easier for you to pay off your credit card debt.
When you call, explain your situation clearly and honestly. For example, if you can make your payments, but the interest rate is too high for you to deal with, let them know. They may be willing to reduce the interest you’re paying. You’ll likely have more success with this strategy if you have a good credit rating and a long history of successfully paying your bills on time.
If you’re not able to pay your payments, let them know how much you can afford and see if there is anything they can do to help. Creditors may be willing to work with you rather than risk you defaulting on your debt.
While paying off credit card debt is certainly possible, there are some situations where professional help may be needed. If you’re not sure where to turn to for help, speaking with a Licensed Insolvency Trustee can be a good idea. A trustee will review your financial situation, then give you details on the available options to help you deal with your credit card debt.