Credit card debt is a more common problem than it was ever before. Statistically, Americans rank higher in credit card debtors than most countries. Almost half of Gen X is focused on clearing their outstanding debts instead of saving up for their retirement fund,while one in four millennials think credit card payment are their major source of debt and not student loans.
I am a millennial myself and even though I do believe my credit card debt is way higher than my student loan, paying off debts like a credit card bill is still manageable. I struggled with this for a long period but eventually found a way to get rid of this debt entirely.
Quick and easy ways to Pay off your credit card debt
Having credit card debt is not exactly a sign of irresponsible spending habits because unexpected expenses can come up anytime and sometimes in emergencies, credit card is a lifeline.
But to avoid paying off debts to clear the outstanding payment is not very responsible. I learned it the hard way and thanks to the Gen X for teaching me this difficult lesson.
The good news is that a credit card debt is not a financial death sentence but surely the sooner you pay it off, the better it is for your credit score.
Also, once your debts are out of the way, you can use your hard-earned money for more exciting expenditures or you can always save it. Laugh at it now, but having a retirement fund is important.
Moving on. After spending nearly 7 years of my adulthood slogging at work so I can pay off debts in time and still falling short every month, I had to take charge of this expense once and for all. I researched and came up with a plan. Once I put that into motion, I was soon debt free.
The fastest way to pay off any debt is to have more free cash and then use it to clear the debt. Thats why I also recommend to look for alternative ways to earn extra cash in – 20x best ways to make extra money during holidays
Often you can save a lot by simple DIY tricks over time. It won’t give you ton of money upfront but in long term never miss a chance to optimize your expenses. I recently did a simple DIY which will save me $6073.
Here are some more ideas you could try to get out of thousands of dollars spent on credit card payments. Close that case once and for all. Let’s take a look at how you can pay off your debts fast.
Like any business, credit card issuers want to build their customer base. To do so they know they have to keep their customers happy by offering them the best customer service and best interest rate.
A lot of people don’t know that you can actually call your credit card issuer and ask for a reduced APR (annual percentage rate) that makes a world of difference in interest payments.
According to a survey, eight in ten credit cardholders who asked for a lower interest rate in the last year were granted upon asking.
Increase your minimum payment
Paying a minimum amount of your credit card bill won’t make a significant difference in your total debt load.
If the ultimate objective is to clear your debt quickly then divert any extra funds you are left with after covering the non-negotiable expenses (food, bills, rent) to cover your credit card debt.
Start small and slowly make it your goal to double your minimum payment or at best pay the statement balance every month. This will also help in keeping your credit score healthy.
You might also like to read:
- How deferred tax makes you rich
- My plan to retire earlier than my friends
- Financial freedom and how to get it
Get a Balance Transfer Credit Card
If you have to make multiple credit card payments then consider consolidating your balances into one so you have to make a single payment every month.
A balance transfer card lets borrowers transfer their balance into a new credit card, typically one with 0% interest rate for the initial period.
If you are able to pay your debt within the initial period at 0% interest rate, you can potentially save a ton of money on interest that otherwise makes a huge dent in the fast credit card debt payment plan. Although, you will have to pay 3% to 5% of the total balance as transfer fee.
At first, this may sound counterproductive – I mean why add more debt to an already existing line of debts only so you can pay off a credit card bill? Doesn’t really make sense, right? But in hindsight, it actually makes complete sense.
Personal loan interest rates are as low as 6% to 7% as compared to the 17% to 24% on a credit card debt. On a loan of $50,000 at 24% rate, you will end up paying $36,304 in interest alone in 5 years while at 7% that amount reduces to $9,404.
A personal loan gives you immediate access to cash that you can directly concentrate on your outstanding payments. After you have fixed this debt, you will have one fixed monthly payment to repay this loan at lower interest rate.
Tackle the expensive debt before others
If you do not want to combine your balances or indulge in another line of credit, then focusing on paying the most expensive debt first with the highest interest rate can speed up the repayment process significantly.
You pay more net interest amount on high interest rate credit cards. So, clearing off any outstanding debt on such cards will free up some extra cash for other low interest credit cards. So, checkout which card of yours charge what interest rates and then pay off the highest interest card first.
Importance of paying off your credit card debt
While most people fall short in paying off debts in time because they usually run out of money by mid-month, some people simply toy with this process. However, as adventurous as it may seem, not being able to pay your credit card debt in time can negatively affect your spending habits heavily.
- Keeping up a healthy credit score is very important. It depicts your capability to pay back your debts and it helps you gain a lot of offers and discounts. The better your score is, the more benefits you have on a lot of services.
- The longer you wait to clear this debt, additional interest on the total payments will keep shooting up. It can take someone as long as 20 years to pay off a credit card debt. You don’t want that debt hanging over your head for that long, do you?
- Also, you might want to avoid paying twice the amount of everything you purchased with your credit card because of the increasing debt and interest, which doesn’t make sense at all.
- It is easy to get a loan if you don’t already have a lot of debt slashing your credit score.
- Plus, it helps getting a mortgage loan if you have no balance credit card payment.
There are only positives to this plan. Getting out of a credit card debt is an achievement for most of us. A lot of people are unable to accomplish this for years. So, go ahead and start working on this plan fast!
Let us know in the comments your experience with credit card debts and how you are coping with it every month. We would love to hear from you.
Do comment below if you have any additional ideas and tips that could help our readers get out of this debt.
You have finished reading: