Many of us tend to live in denial when it comes to credit card debt. Use these seven tips to pay off your card quicker and discover the liberating feeling of being credit card debt free.
1. Plan your approach
If you’re serious about wiping out that credit card, you’ll need to do a few things. First, eliminate the spending habits that created the debt. Then make a plan for the money you have coming in. Next devise a strategy to pay off the debt, and finally, introduce ways of being good with money so that you avoid slipping back into old ways.
2. Eliminate the negative
Getting control over your debt means understanding how and why you got there in the first place. To do this, you need to take an honest look at your spending habits and identify places where you can stem the flow of money out of your accounts. You’ll need to be brutally honest and ready to make sacrifices to free up money that can be funnelled toward the debt. The best way to do this is to create a budget which will become your blueprint for the future.
3. Cut interest costs
When it comes to interest, the longer you have debt, the greater the cost; and that’s money that would be better off paying down your debt. So get smart about it, study up on the cost of borrowing, and minimise your interest costs. One way of doing this is to find the lowest credit card interest rate you can. Chances are your bank will have a low rate card that you simply don’t know about. Let us know what you’re trying to achieve and get some expert input.
4. Balance transfers
Another way to accelerate paying off your card is a balance transfer — these offer an even better deal on interest costs, albeit over a shorter period. Some deals will have a special rate for six to 12 months on the transferred debt before reverting to the standard interest rate. If you’re able to pay more in a shorter period of time (and are disciplined enough to limit spend on the card at the same time), this can save you plenty in interest charges. You’re also often able to transfer multiple balances onto the same credit card.
5. Find a strategy that suits
Paying down debt can be a personal thing which means finding a strategy that works best for you. For instance, if there are multiple debts involved, some people prefer to tackle the larger amounts that carry the highest interest costs first. Others might find success by knocking off the smallest debt first to get a few quick wins under the belt.
6. Debt consolidation loans
If it all seems too much, a debt consolidation loan can be a good way of condensing many debts into a single, easier to manage loan. This tactic helps by creating a degree of certainty around your monthly costs. A personal loan typically has a set term of a few years with repayments that are the same each month. This makes budgeting easier since you know exactly what’s coming up. If you already have a personal loan or a home loan, check up on some of the many options on offer as there may be a more cost-effective option for you.
7. Staying debt free
When the end is in sight, it’s time to think about how you can stay debt free. You could start by lowering your card’s limit to something more manageable. Try to pay off your card in full at the end of each month to avoid interest altogether, and it could be a good idea to look for a low interest rate credit card if you don’t quite manage to pay it off in full. Also, try to limit using your credit card to withdraw cash as this attracts a higher rate of interest that starts accumulating from day one.