If you keep balances on your credit cards month after month, paying off that debt quickly may be easier than you think. The key is to develop a good plan and stick with it. These four strategies can help you decide what actions to take to quickly pay off any credit card debt you may have.
Do you have balances on more than one card? If so, be sure to always pay at least the minimum on each card. Then focus on paying off the balance in full, one card at a time. You can choose which card to focus on in one of the following ways:
- Review the interest rate section of your statements to see which credit card charges the highest interest rate, and focus on paying that debt first.
- Pay the card with the lowest balance first, then take the money you used to pay off that debt and use it to pay off the next lowest balance.
View your card statement. If you pay the minimum balance on your credit card, it takes much longer for you to finish paying your bill. If you pay more than the minimum, you will pay less interest overall. Your credit card company is required to show it to you on your statement so that you can see how it applies to your account.
Easy fix : Pay a little more each month. Every dollar you pay over the minimum payment is applied to your balance, and the lower your balance, the less you will have to pay in interest.
Consolidating your debt allows you to combine multiple higher-interest balances into one with a lower rate, so you can pay off your debt faster and without increasing payment amounts. Here are two common ways to consolidate debt:
- Take advantage of a low interest rate balance transfer to move your debt off high interest rate cards. Keep in mind that balance transfer fees are often 3 to 5 percent, but the savings from a lower interest rate are often greater than the balance transfer fee. Always include that factor when considering this option.
- If you have equity in your home, you may be able to use it to pay off card debt. A home equity line of credit may offer you a lower interest rate than what your cards charge. Keep in mind that closing costs often apply, but an added benefit is that interest payments on home equity loans are often tax deductible.
If you decide to consolidate, keep in mind that it is very important to control your expenses to avoid accumulating new debt on top of the ones you just consolidated.
Start by classifying your monthly expenses, for example: food, transportation, housing, and entertainment. Your credit card statement can be a useful tool; many card issuers separate their expenses by category.
Next, look for areas that you can narrow down. Then take the money you have free and apply it to pay off your debt.