How to Pay Off Your Credit Card in a Year

One of the biggest problems with debt is that so much of the repayment goes towards interest. It can take years to pay a credit card off if you only pay the minimum monthly payments. Further, by the time its paid, you've spent nearly as much in interest as you have on the loan. With a little simple math you can calculate how to pay that credit card within the year.

Instructions

1

Don't add more debt. For this to work, you can't make any further purchases on the card. Further you need to make your payments on time to avoid additional fees and penalties.

2

Gather your credit card statement. On a sheet of paper write down the balance due and the interest rate of the loan.

3

Turn the annual interest rate into a decimal by dividing the interest rate by 100. For example if your interest rate is 25 percent, divide 25 by 100 to get 0.25. This is your annual rate (what you pay over the year). You can calculate your monthly rate by dividing your interest rate by 12. For example: 0.25/12=0.02

4

Multiply your percentage interest rate with the balance due. If you have a $5,000 balance due on your credit card at 25 percent interest, you would multiply $5,000 by 0.25 to get $1,250. This is the amount of interest you'd pay over the course of the year on a $5,000 balance.

5

Add the result from Step 4 to your balance due. In this example it would be $5,000+1,250 = $6,250.

6

Divide $6,250 from Step 5 by 12 to get monthly payment needed for pay off in a year. In this example it would be $520 per month. So to pay off your credit card balance of $5,000 in one year, you need to pay foughly $550 per month.

7

Find the money you need to pay the debt down. Coming up with the extra cash beyond the minimum payment can be tough. Get creative with your budget. If you can cut your other expenses by 10 percent or 20 percent, you can usually find an extra couple hundred dollars. Visit websites and read books that teach you how to save on groceries, utilities and other expenses.

8

Reward yourself. At the end of the year you'll be debt free and have extra money that was once paying off debt. While you don't want to go wild with your spending, you should reward yourself for a job well done. Setting a goal with a reward at the end will keep you motivated to stay the course during the year.