If you are committed to paying off your credit card debt, there are some strategies that you can take on in order to successfully shrink your debt over time. The process of eliminating debt can often feel quite crippling especially if it’s been piling up over years. Credit card debt is not uncommon as around 45% of the American public carry some type of balance on their credit card. Paying down your debt could help you save money on consistent interest payments over time and work at improving your credit score. Here are some of the best strategies that you can use to pay down credit card debt as fast as possible.
Take a look at your budget
Getting started with a budget and finding ways that you can take more money out of your regular salary and turn it towards your debt can be one of the most crucial ways to start with eliminating your debts over time. In some cases, that has a tendency to rack up when people are not careful with their budgeting. Take a hard look at your expenses and areas that you could potentially sacrifice each month to work at reducing your debt over time.
By making adjustments in your entertainment budget or taking some of the money that you would traditionally spend on clothes and putting it into your credit card debt, you can start redirecting some of your unnecessary spending towards paying down debts. Sticking your budget over time and not overstretching your finances by relying on credit can be a great way to reduce debt in the future as well.
Stop using your cards altogether
If you are committed to the goal of paying down your credit card debt, you need to stop relying on credit cards at point-of-sale or in a number of different payment situations. Even though it can be tough not getting the rewards points and other items associated with your card, paying with cash and slowly paying down your balance is one of the easiest ways that you can work at managing your debt. If it’s unavoidable for you to use a credit card such as for a hotel room or rental car, be sure that you have the cash on hand to immediately place a payment on your credit card to account for the new spend. During the process of paying off your debts, you need to remain committed to avoiding the use of your card as much as possible.
Examine your credit card rates
One of the best strategies that you can take on for sequentially paying down your debt is to pick out the credit cards that have the highest interest rate first. Investing the money that you have every month on the cards with the highest interest rate while paying the minimums on the others will put you on the right track.
Paying down the highest interest card as quickly as possible will help you to choose the area where you can achieve the lowest possible balance and the lowest possible interest accrued every month. Paying down one card in full with the highest utilization rate is a good target to start with.
Contact your creditors
You may be surprised to know that you can often negotiate with your creditors for your interest rates and more. If you have a great history with the company and you generally have good credit, contacting your credit card company could help you get access to a card with a lower rate or a lower rate on your existing card. Lowering your monthly fees and your interest rates can help to make sure that you can pay off more of your debts a little bit faster. Just a few phone calls could end up saving you hundreds of dollars in interest over the time that it takes you to pay back your credit card debts.
Transfer your balance if possible
If you have two or more credit cards that have different interest rates you may look into contacting your creditor in order to transfer the balance from the card with a higher interest rate. A balance transfer could give you the option to pay off the card with a higher interest rate and consolidate your balance on a card that has the lower interest rate. Balance transfers usually do incur a fee of around 3% of the total amount transferred but certain types of credit cards do offer a 0% promotional rate for your first balance transfer. This can be one of the simplest ways that you can get your balance off of a high-interest rate card without having to pay a large lump sum upfront.
Check into consolidation
Certain types of credit card debt are best paid off with the help of consolidation. Going to a financial institution or checking out peer-to-peer lending could be an excellent way that you could get a loan at a lower interest rate than your credit card to quickly pay down your debts. With a loan from a financial institution, you could wipe your credit card debt and then pay off a loan at an interest rate that could be half of what you might pay on your credit card.
Never close up your credit card
As soon as you have paid off one credit card account, you should never be tempted to immediately close off the card. Keeping the card open after you’ve paid it off is usually one of the best ways that you can keep a good credit history. The credit that you have versus what you borrowed often reflects as your credit utilization ratio which is a direct reflection of your credit score. Having less credit in your name will increase your debt utilization ratio and this can actually work to hurt your credit history. Keeping your card open and making sure that you stay on top of any payments you place on it is the best move for your credit score.