Credit cards are one of the best financial tools available but when used recklessly, they are a one-way ticket to a debt trap. Credit card debt can pile up due to a number of reasons. Paying it off is pretty straightforward and you just need a plan. There is no single best way to get rid of credit card debt because it depends on your situation. Pick a strategy for yourself and stick with it until your balances are paid off in full. Here are
5 useful tips that will help you pay off your credit card debts…
Always pay more than the minimum balance due
To make a significant reduction in your debt, you need to pay more than the minimum balance on your credit card statements each month. Paying the minimum balance which is usually 3% of the outstanding balance, only prolongs a debt payoff strategy. Strengthen your commitment to pay everything off by making payments weekly, instead of monthly. Paying just the minimum amount is a practice followed by many cardholders. The mounting debts as a result of this cause many borrowers to get locked in unending debt spirals. Remember that credit cards come with very high-interest rates and paying only the minimum due amount is only increasing your outstanding amount significantly at an exponential rate, depending on the outstanding amount.
Pay off debts with the highest interest rates first
This is something which people forget to consider. When you have debts on more than one card, most people would consider paying the one with a shorter due date first. Clearly, this is the wrong tactic. Clear off debts on the card that charges a higher interest rate first. This can help you reduce your total interest outgo since unpaid dues with higher interest rates accumulate interest faster. Pay off the balance with the highest interest first. You should increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards.
Take advantage of balance transfer offers
If you are already caught up in a bad debt cycle, the option of balance transfer or transferring your dues from one card to another is the best option for you. If you have a high-interest card with a balance that you are confident you can pay off in a few months, we recommend moving the debt to a card that offers a zero-interest balance transfer. You will need to pay off the debt before the balance transfer expires, or else you are often hit with a much higher interest rate. If you do it carefully, you can save hundreds on interest through this method. A balance transfer allows you to shift your balance from one card to the other or from multiple cards to one single card. This gives you temporary relief from debts. The second bank also allows a credit-free period up to 90 days for easier repayment of your pending amount. Once the credit period ends, regular interest will be levied on the cardholder.
Formulate a budget for yourself
The first step towards solving your debt problem is to establish a budget. If you do not scale back your spending, you will dig yourself into a deeper hole. There are many tips for paying off credit card debt, but if you are not focusing on the overall problem of spending more than you make, it is easy to stay in the same cycle. By creating a budget that accurately accounts for your expenses and income, you will be able to curb extra spending and find more money to throw at your credit card debt. Whether you use an app or go with a pencil and paper is a matter of personal preference. As long as it works for you and complements your lifestyle, any realistic budget can be a good budget.
Consolidate your credit card debt
You can consolidate your credit card debt with a credit card consolidation loan, which is also known as a personal loan. It can help you consolidate your existing credit card debt into an unsecured personal loan that is typically repayable in 3-6 years. If you can obtain a lower interest rate than your current credit card interest rate and repay your credit card debt in this time frame, a personal loan is a great strategy to save interest costs. You can even automate payments so you do not have to worry about paying late.