If you have credit crd debt, it will probably come to no surprise to you that it is commonly referred to as the worst kind of debt that you can have. Interest rates average over 17 percent across the country with many rates being much higher. It is not unheard of to find credit cards with 29 percent interest.
If you are tired of those credit card bills, now is the time to take action. Here is Tina’s advice on how to slash your credit card debt quickly.
First, Cut Up Your Cards
Literally, cut up your credit cards. This might be the only way to get you to stop adding to the debt. If you must keep a card for an emergency, lock it up at home and by no means should you carry it with you. If you have been a serial shopper and actually know your credit card numbers by heart or have them stored on your computer, call your issuer and report them lost. This way, you can get a new number that you do not know or have on auto save.
Once you have cut off credit card use, there is no way to add to the debt. At this point, even the minimum payment will reduce your balance. Of course, you can do better than the minimum payment, but I will get to that.
Next, Lets Get Organized
It is time to do something that you probably do not want to do. List your debt.
Get the information on each card and write down what you owe on each card, the minimum payment and the interest rate.
Preferably you will do this in a spreadsheet which will make it easier to calculate your total debt. You can set the spreadsheet to automatically add each column so that you see your total debt and total monthly payments.
Once you complete this step, you might actually be shocked at just how much you owe and how much those minimum payments add up to. Are you paying 200 dollars a month, 300 dollars or even more. What could you do with that money if you didn’t have to use it to pay a minimum payment?
Finally, Choose A Payment Strategy
There are two main strategies for paying off credit card debt. There is the logical approach and the motivational approach. The approach you use depends on the type of person you are.
Are You Disciplined?
If you are a disciplined person, you will go the logical route. Logically, it makes the most sense to pay off the cards with the highest interest rate first. This will ultimately result in the lowest overall interest paid.
You should be disciplined take this approach because the highest interest card might not be the one with the lowest balance, it could even be one with the highest. If you are paying down a $5000 card, for example, at the rate of even $300 a month, it will take some time to get results. If you are not disciplined, you might give up.
With this approach, you will pay just the minimum balance on all of your cards except the one with the highest interest rate. With that card, you will pay as much as you can afford to pay each month. Keep doing this until that credit card is paid off and then move on to the card with the next highest interest rate.
Do You Need Motivation?
If you need to be motivated, you will take a different approach. Instead of paying the lowest interest card first, you will pay the one with the lowest balance.
By paying the lowest balance card first, you will be able to pay off a card quicker. Using the same $300 a month payment above, you can pay off low balance cards very quickly. Seeing cards get paid off is very rewarding. It motivates you to keep going much better than the drudgery of paying off high balance cards.
If this is the approach that you wish to take, pay the minimum on every card but the lowest balance card. With that card, you will pay off as much as you can until it is paid in full. Then you repeat this process on the next highest balance card.
A Few Credit Card Tips
Here are a few tips and tricks that you can take advantage of while you pay down your credit card debt.
- Don’t close your accounts.
Unless your card has an annual fee, do not close it. Closing a credit card would reduce your available credit and probably lower your credit score. Depending on the card, you might have to make a token charge once or twice a year to keep it open. Just be sure to pay it off immediately.
- Take advantage of 0% offers.
If your credit is good enough to qualify for 0% credit card transfer offers use them. It is a great way to reduce the interest you pay while you pay a card down. Just be careful not to charge the card up. It might be a good idea to cut it up as soon as the card arrives.
- Transfer higher interest balances to lower interest cards.
As you pay down cards, if you have the opportunity to charge a higher interest balance over to a lower one, do so. The less interest you pay, the faster you will pay down your debt.
- Negotiate lower interest rates.
Call your credit card companies and attempt to lower your interest rate. Even a few points off your interest rate can be helpful.