Once credit card debt has accumulated, paying off balances can prove challenging. Fortunately, specific techniques can help pay off credit card debt faster. The benefits to getting rid of debt include freeing up disposable income and improving your FICO credit score.
High-Rate Credit Cards
High-rate credit cards costs you the most money each month; the longer you keep a balance on these cards, the more money you'll spend in the long run. There's the option of paying off cards with the lowest balance first because this method can provide a sense of accomplishment. However, it's smarter to get rid of high-rate cards first and save money on interest. Look at all your credit card bills and eliminate the debt with the highest interest rate first.
Bring Down the Interest
Since interest rates on credit cards are negotiable, get on the phone with the company that issues your credit card and request a lower rate. Getting a lower rate also helps with debt elimination. The less money spent on interest charges each month, the quicker you can pay down the principal and get rid of the debt completely.
Minimum Payments
Minimum payments on a credit card are generally only a small percentage of the account balance, and paying only the minimum doesn't get rid of credit card debt fast. Pay off your credit cad debt with higher payments--whatever extra amount you can afford. Review expenses to see if you can pay double or triple your payments, and drop a lump sum on balances whenever you come into additional cash, such as sizable tax return or a bonus from work.
Benefits of Cash
Using cash for purchases plays a significant role in debt elimination. Paying off credit card debt will involve controlling credit card usage. Charging an item and then paying off the balance immediately is key to avoiding new debt. But if you know that you're not going to have money to pay off a new charge, it's smarter to leave the item in the store until you've saved the cash.
Late Payments
Credit card companies charge a fee every time a payment arrives late. Late fees from frequently sending in payments past the due date can increase your account balances, and some card companies will raise your interest rate on the account. Help your debt elimination efforts by always paying your creditors on time. Know your due dates and pay early.
Other Options
Other methods to help pay off credit card debt can include taking out a home equity loan, using these funds to pay credit card companies and then repaying the home equity lender in monthly installments at a lower interest rate. This payoff method only benefits homeowners with adequate equity. If considering a bankruptcy to eliminate credit card debt, consider debt settlement as an alternative. Contact an attorney to discuss how debt settlements work and the possible consequences to your credit score. With this method, you work out an agreement with your creditors to settle your debt for less than what you owe.
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