If you have credit card debt, you are not alone. In 2016, the average American household had $16,748 worth of credit card balances, but that does not mean that you have to stay in the same position forever. The longer you allow debt to sit in your name, the harder it is to get out of its cycle. This is especially true if you only make the minimum payments and continuously reuse the card to cushion yourself.
As you work your way towards financial freedom, check out these quick tips to kill any and all credit card debt that you may have.
- Improve Your Interest Rate
One of the quickest ways to make a big impact on your credit card debt is to obtain a better interest rate. It can be a difficult process at times, but it is worth it and will pay off big time in the end.
The first thing you should do is call your credit card company and try to negotiate a new rate. Even if you can only negotiate a one or two percent change, it is better than nothing at all. Just a couple of percentage points off of your interest rate will save you hundreds of dollars as you work to pay down your balances. It never hurts to try and the worst that can be said is “no.”
If this does not work out for you, you can check to see if you may qualify for a personal loan. With a personal loan, your debt can be consolidated from multiple credit cards with just one interest rate. This will allow you to pay off your balances with only one monthly payment.
- Pay More Than the Monthly Minimum Payment
Just making the monthly minimum payments will take you what may seem like decades to pay off the actual amount that you owe. You will also wind up spending a lot more money in interest.
For example, if you currently carry a $2,500 card balance and your APR is 17.5%, you can expect it to take you 5 years and 2 months to pay off your credit card. By the time your credit card is paid off, you will have spent a total of $3,798. Crazy right?
Applying more than the monthly minimum will allow you to pay down your credit card balance quickly and ultimately reduce the amount that you’ll pay out in interest. Even if you can only send in an extra $10 or $15 per month, do it. The end result will be more than worth it.
- Create a Payoff Plan
The last tip is to create yourself a payoff plan. This entails designing a plan that will detail out exactly how you will pay off all of your credit card debt.
One commonly used strategy is to send all of your extra cash to the credit card or loan with the highest interest rate. Another strategy is to pay off the credit card or loan with the smallest amount, while only making the minimum monthly payments on the other balances you may have. Both are effective for knocking out credit card debt, but choose what will work best for your individual situation.
If you are someone that likes to see change occurring quickly, consider paying off the smaller amounts first and then move to the higher balances. This will give you the momentum you need to continue chomping away at your debt.
An easy way to set up your payoff plan is to utilize a payoff calculator. Payoff calculators are designed to do the math for you and are great for detailing exactly what you’ll be paying monthly so that there are no surprises!
If you find yourself tempted to use your credit card, hide the plastic. You should avoid using it as much as possible while you pay down your balances. Having credit card debt can be stressful, but utilizing these three tips will set you on the path towards financial freedom.