Paying off Credit Card Debt

If you’re working on paying off credit card debt, there are several tactics you can try to get those balances down.

Before you begin working on your debt reduction plans, be sure you have an accurate snapshot of your financial situation as it is right now. This will help you to prioritize which debts need to be paid before others.

Creating a Financial Snapshot

Write down how much you owe on your current credit card balances. Alongside each balance, write down how much you’re paying in interest on these debts and how much the repayment is per month.

This simple list will give you a clearer idea of which debts are costing you the most in interest charges and help you identify which debts need to be cleared first.

Decide on Debt Reduction Methods

While most tips for paying off credit card debt tell people to simply pay more than the minimum payment each month, this simply isn’t possible for some people. If you’re already on a tight budget, how can you be expected to increase your minimum payments?

Another option open to you is to apply for credit card consolidation. This could reduce the amount of interest you pay on your debts and reduce your monthly payments.

Lower repayments could improve your cash flow and make it far easier to budget each month.

Credit Card Consolidation Loans

Most people are aware of the availability of credit card consolidation loans. These are loans that allow you to roll your balances over to one simple loan with a lower repayment each month.

You should also find that you’re paying far less interest on these types of loans than you were paying on your outstanding credit card balance. This can save you a lot of money in the long run.

Your payments are structured so that every payment you make will be reducing your debt, so this could be a good way to get back in control of your financial situation.

Balance Transfer Credit Cards

You might also qualify for a balance transfer offer from a credit card lender. A balance transfer is designed to allow you to roll your credit card balances over to a new card with a much lower interest rate.

This option can reduce your monthly payments and lower the amount of interest you’re charged. However, you will need to be disciplined about putting your interest savings back onto repaying your debt each month in order to benefit from this option.

While it might be tempting to keep the monthly payment savings for other expenses, keep in mind that many balance transfer offers may only offer those low rates for an introductory period.

When this low interest term expires, you could find your interest rate may revert to a much higher rate, putting you back at square one if you haven’t reduced your debt.

Use the opportunity to benefit from your lowered interest rates and really chip away at your balances. You could find that it only takes a couple of months to make real headway on paying off credit card debt faster than you thought.

Category: Personal Budget
Tags: