Search Google for “how to pay off credit card debt” will undoubtedly return a slew of results promising a “big secret” to pay off your credit cards and other debts. Not only pay them off, but pay them off quickly.
There’s no hidden magic involved when it comes to reducing or eliminating your debt. It’s a lot like working out — it takes time and perseverance, but the results are definitely worth it. Thankfully, there are plenty of tried-and-true strategies you can use to work toward a debt-free future.
Who should focus on paying off credit card debt?
The easy answer is “absolutely everyone who has it.” Nearly half of American households carry a credit card balance month to month, primarily because they’re unable to pay off their full balance, so costly interest keeps building— making it even harder to pay it off. Whether you’re among those who have managed to clear their balance by every due date — or you struggle with covering the minimum amount due — learning how to manage your credit card debt can relieve an immense amount of stress and positively impact your family’s financial future.
Welcome a refined budget with open arms.
While it’s true that most people don’t enjoy cutting back on their spending, those daily convenience buys can add up quickly. If your morning caffeine craving is costing you $7 at the local drive-through every day, consider investing in a moderately priced coffee machine of your own. You’d be surprised at how much you can save in a month by monitoring those convenience buys.
And don’t worry, we still need our special extra dirty, skinny, chai tea latte sometimes, too.
Cutting your daily coffee run down to once or twice a week isn’t the only way you can save, though. Often people sign up for free trials and forget to cancel. Then you end up with a subscription on auto-draft that you keep meaning to cancel but never quite get around to — gym memberships are one of the most popular expenses that just never get canceled.
Check your subscriptions and memberships and decide which ones you actually use. Then, cancel the ones you don’t. Those savings are easy to use to payoff your credit cards, because it’s money you were going to spend anyway.
Consider negotiating your interest rates.
Calling your creditors to ask about potentially lower interest rates is one of the easiest steps you can take to pay your credit card balance quickly. Negotiating your interest rate has zero impact on your credit score, so asking for a better rate is basically risk-free. Nervous about making the call? So are most people. Use the steps below to make that call a little easier:
- Write down the interest rates for all of your credit cards. Your goal is to pay off the cards with the highest rates first, so those are the cards you want to negotiate first.
- Prepare a list for each card. Use that list as a set of talking points during your negotiation call. Include things like your track record of making your payments on time, how long you’ve hard the card, if you usually make more than the minimum payment, and if it’s good, your credit score.
Many creditors are willing to work with customers who’ve shown they’re capable of making consistent payments. After all, they want you to continue using their card, so providing you with even a temporary reduction in interest is… well, in their best interest.
Just be sure to come to the table armed with facts and stats that support your case. Shop around to see what other creditors are offering, as well as what the national average is for the kinds of cards you hold.
Pay more than the minimum, and pay more than once a month.
We know that this one is easier said than done, but hear us out. If at all possible, try to make a partial payment more than once a month (even twice is considered beneficial). Here’s why:
The interest you accrue isn’t determined by the amount you owe when your billing cycle ends or when your due date rolls around. It’s based on the average balance you carry daily.
For example: You have a balance of $2,000 on one of your credit cards and your current budget allows you to put $250 toward that debt each month. If you make a single payment of $250 on your due date, your daily average will reflect a higher amount over the course of your billing cycle than if you split your payment into two — paying $125 on the 15thday and the other $125 on day 30, for instance. It may seem like a minor difference, but this small change can directly affect the amount of interest you accrue overall, and the savings compound every month you consistently pay this way.
Consider using your tax refund to make a lump-sum payment
The majority of taxpayers view their annual refund as a long-awaited bonus. For many, it’s the biggest paycheck they’ll see all year. If you consistently receive an IRS refund, you probably already have plans for it — a well-deserved vacation, repairs to your home, a self-care splurge, or maybe even a college fund.
For many, a hefty refund is the perfect way to jump start the process of getting out of debt and living a more comfortable and financially sound life. Of course, what you choose to do with your refund is a personal decision that only you can make — TaxAct is just here to help along the way.
If you need help creating or managing a budget, you’re not alone. Millions have found that using apps like Mint and EveryDollar make it easier to commit to saving. Just find the one that works for the way you think about money and get started — it’s never too late to change the trajectory of your credit card debt.
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Source : TaxAct Blog