Paying off your credit card debt may seem like a long process, but with some advance planning you can eliminate your debt more quickly than you think. The extremes you may have to go to depend on how much debt you are carrying. For example, one suggestion might be to take a second job until your debt is paid. When you eliminate high-interest credit card debt, you can then apply more cash to paying off your other obligations, such as a car loan or mortgage.
Minimum Payments
The financial experts at the Motley Fool recommend paying more than your scheduled minimum payments each month to pay your balance off faster. Your interest is calculated based on your remaining balance, and your monthly payment is normally about 3 percent of your balance due after the interest is calculated. By making higher than minimum payments, you reduce the principal balance owed and pay less in interest each month. Make sure you indicate that the extra amount you are paying is to be applied to your principal balance, and try to pay at least 50 percent more than your monthly minimum. For example, if your minimum payment is $50, then pay at least $75 each month. It may not seem like much at first, but it can quickly add up as you reduce the amount of principal and interest owed. Try to maintain the same payment each month even as your monthly minimum drops. If you were paying $75 a month and your monthly minimum drops to $40, continue to pay the $75.
High Interest First
It is likely that each credit card you hold has a different interest rate. When you decide to pay off your credit cards, you can greatly speed the process by paying off the cards with the highest interest rates first. The monthly payments on your higher-interest cards put less of your payment toward the principal than do payments on your other cards. Apply your extra bill-paying money to the higher-interest cards first to eliminate them. Your lower-interest cards then get paid off faster, because more of your payment goes toward the principal and less toward the interest.
Extra Funds
The fastest way to pay off credit card debt is to apply extra money each month toward your remaining balances. You could take out a consolidation loan, but that is merely shifting the debt around, not eliminating it. Trim expenses from your monthly budget, then apply your extra money toward paying off your credit cards. Reduce the amount you spend each month on going out and entertaining in your home. If you stop to buy coffee each morning, start bringing coffee from home to save money. Bring lunch to work rather than go out for lunch. Reduce the amount of non-essential driving you do to save on gas. You could take on a part-time job just for the amount of time it takes to pay back your credit cards. If you owe more than $10,000 in credit card debt, consider taking a second full-time job until your finances are under control. A lack of financial discipline may be what got you into your trouble, and now you may need to exercise some control to get out of it.
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