It’s a fantastic moment to pay off credit card debt.
Following the COVID-19 epidemic, the economy is beginning to return to normality, and the typical American’s personal savings rate has reached new highs.
Many individuals are still saddled with high-interest credit card debt, which will undoubtedly become worse when the Federal Reserve raises interest rates next year.
In other words, now is the moment to start paying off your debt, mainly if you were able to save money during the epidemic.
1. Make a monthly payment that is higher than usual.
You’re undoubtedly used to monthly billing cycles, but you don’t have to wait until the due date to pay off a portion of your debt, and you’re not restricted to making just one payment every month.
Interest on credit cards is compounded daily, and financing charges are calculated using your account’s average daily balance. That means you’ll have to pay more in interest charges for each day you don’t make a payment.
Making two payments a month may be reasonable if you’re paid every two weeks or bi-monthly; if you’re paid more often — for example, you receive a weekly paycheck, or you’re a tipped worker — you may want to consider beginning your debt-management plan by paying weekly.
Another benefit of making many monthly payments is that you won’t change your mind later and spend the money on anything else if you use it to pay down your credit card amount as soon as you receive it.
Just make sure that the entire amount you pay by the due date on your credit card statement is at least as much as your minimum payment since if you don’t, you’ll be charged late fees and penalty rates.
Another helpful hint: Paying off your debt rapidly might help you boost your credit score by decreasing your credit usage, making it simpler to qualify for a balance transfer credit card (read on for more information on how to do that).
2. Get a credit card with a debt transfer option.
If you have a good credit score, you may be able to get a card that would help you pay off your debt faster.
For a limited time, balance transfer credit cards offer introductory APR rates of 0% for a promotional term ranging from 12 to 18 months. This first time provides you with a window of opportunity to swiftly pay off your debt: Because you don’t have to pay interest, your total monthly payment goes toward paying down the debt. But, mainly if the non-introductory APR rate is high, make it a point to pay off your amount before the promotional period expires.
A word of caution: While a balance transfer credit card with 0% APR on purchases may seem to be a great advantage, it’s crucial to stay focused on your primary objective (paying off your credit card debt).
Also, keep in mind that many balance transfer cards have a balance transfer fee of at least 3% of the transferred balance, which may add up quickly if you have a lot of debt. Look for cards with low — or no — balance transfer fees so you can put more money toward paying down your debt. (Read The Best 0% APR Credit Cards Available Right Now for more information see BankruptcyHQ.)
3. Use a “debt avalanche” or “debt snowball” to design a payback strategy.
When it comes to credit card debt repayment.
The first strategy, known as the “debt avalanche,” focuses on paying off your credit cards with the highest interest rates first, then moving on to those with the lowest interest rates. This strategy makes the most sense mathematically since you’re cutting down on the time it takes to pay off the credit cards that are costing you the most money.
The “debt snowball” strategy is another option. This is for folks who have trouble sticking to a debt-reduction plan when there seems to be no way out.
The “debt snowball,” made famous by personal financial guru Dave Ramsey, focuses on paying off your lowest bills first, then your next-smallest number, and so on. According to some behavioral economists, paying off minor debts early in the repayment process might be a valuable mental incentive that motivates some individuals to keep going.
This isn’t as cost-effective as paying off the high-interest loan first, but if it motivates you to become serious about paying off your obligations, it may be the better option.
4. Borrow money from a friend or family member.
Applying for a personal loan and paying off your credit card debt in full may be your best choice if you don’t have outstanding credit. You may look for a lender online or inquire about personal loans at a local bank or credit union (they might also be called debt consolidation loans).
Personal loan APRs are frequently several percentage points lower than credit card APRs, so you’ll still be paying interest, but at a lesser rate. Instead of having to keep track of many credit card accounts and due dates, you’ll simply have to make one monthly debt payment.
5. Cut costs by sticking to a strict budget.
Nobody wants to hear it, but throwing extra money at debt every month is one of the simplest ways to pay it off quickly.
This entails figuring out new methods to save, such as canceling television or limiting the number of times you get takeout. You’re one step closer to becoming debt-free if you can make more than the minimum payment on your credit card bills.
6. Seek expert assistance from a credit counseling agency.
If you’ve done everything on this list and still can’t bring your credit card debt under control, it’s time to seek professional help. Nonprofit credit counseling organizations will examine your credit card debts in the context of your other financial responsibilities, such as a home equity loan or line of credit, auto payments, or college loans. They will work with you to devise a repayment strategy. Some even negotiate with credit card issuers to obtain a reduced interest rate and provide financial literacy training to protect you from going back into debt.
If your financial situation is deplorable and you’re considering bankruptcy, it’s already a legal requirement that you go through credit counseling before filing. Taking this step on your own may lead to the revelation that, after all, you can defeat your debt with a payback plan rather than bankruptcy.
Conclusion: How to Get Rid of Credit Card Debt
With the job market strengthening, earnings growth, and more emergency cash in many people’s bank accounts, now may be a fantastic time to pay off all of your outstanding obligations — or at the very least, start paying them down.
Although it may not be fast or simple, many individuals who adhere to a debt management plan say the relief they experience after being debt-free is well worth the work.
If you have a lot of credit card debt, there’s no better time than now to start paying it off.