Assessing your mound of credit card debt can become a daunting, frustrating task. But addressing your debt is key to paying off the balances and fixing your finances. Credit card debt can stay with you for countless years and result in paying a lot of money in interest. Consider these effective tips for repaying your credit card debt sooner.
Start with the Smallest Balance
There are different methods to paying off credit card debt. Some people choose to make higher payments toward all their debts until the balance disappears, while others tackle the card with the highest interest rate first. Consider paying off your smaller balances first in order to achieve a sense of accomplishment. It's much easier to pay off a $300 balance as opposed to a credit card with a $1,000 balance.
Eliminate Credit Cards
Don't cancel credit card accounts, which can reduce your length of credit history and bring down your FICO score. Instead, use scissors to cut your cards into several pieces. Save one card for emergencies and then lock it away. Keeping credit cards with you while trying to pay down balances increases the temptation to spend. Paying down your balance and then re-using cards continue the debt cycle.
Bring Down Interest Rates
Making higher payments on your credit cards each month works well if you have a lower interest rate on the card. Monthly payments pay down the new interest charges first, and then creditors apply money to your principal balance. If you don't owe much in interest charges, more of your payment goes to the actual balance. Check into low-rate balance transfer offers, or talk to your creditor to negotiate an interest rate reduction.
Spend Less Money
It's challenging to pay down credit card debt when you spend an enormous amount of money each month on needless items. Keep all your receipts for an entire month to assess where your money goes. How much do you spend shopping, entertainment, dining out and on other forms of recreation? If non-essentials take money away from debt payments, reduce spending and use these funds to eliminate your balances on credit cards.
Create Additional Cash
Depending on how much you owe, you may achieve a debt-free life by selling personal belongings or applying for a part-time second job to increase monthly income. This method works only if you use all proceeds from the sale and income from your part-time job to pay down debt.
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