10 Ways to get Out of Credit Card Debt
$733,000,000,000. That’s a lot of zeros! But $733 billion is what American’s owe to credit card companies. Today, the average U.S. household is carrying approximately $15,762.00 in credit card debt. The reason is the that household income has grown by only 26%, but the cost of living has gone up by 29% — With medical costs growing by 51% and food and beverage prices increasing by 37% .
With these statistics, it’s no wonder the average American can barely keep up with minimal living expenses and depend on a 2 person employment income. While easy to accrue, credit card and other debts can be difficult, if not impossible, for some to reduce due to interest rates in the high double-digits. Luckily, by planning, sticking to a budget, and eliminating unnecessary spending, it is possible to eliminate your debt.
1. Pay Off the Highest Interest Rate Card First
Use any extra income you have every month into paying off your highest interest rate card and only paying the minimums on your others. Once you’ve paid off your highest interest rate card, do the same for all your other cards until they are all paid off. Each time you pay off a card, you will be left with a little more extra cash every month, which you can invest into the next card you’re paying off.
2. Stop Using Your Cards
Plan to pay in cash and you will automatically spend less. Research has shown that people are willing to pay twice as much for an item when they are paying with a credit card as opposed to cash.
3. Start Planning
Make a list listing which cards you have, how much you owe on each, their due dates and their interest rates. Set a realistic strategy on how you’ll begin paying it off. You won’t be able to solve a problem if you don’t know what exactly what you are dealing with.
4. Create a Budget
Make a budget specifying your current expenses. Once you see where your money has been going decide how you can save money. Examples include bringing lunch to work, use coupons, and turn off lights, just to name a few. The extra money can be used to pay down your credit cards even faster.
5. Request a Lower Interest Rate
Call each credit card company and request a lower interest rate. Lower rates can mean lower monthly payments and fees, so every payment will pay off more of the principal.
6. Make Two Minimum Payments Per Month
Making two minimum payments every month can be critical to paying off dent. Every time you make a payment, your average daily balance is reduced, which results in lower interest charges.
7. Transfer a Balance
If you have a credit card with a high interest rate, you may want to consider a balance transfer to a new card with a lower interest. It’ll also mean that you’re spending less in interest fees, so more money will be going towards the principal owed.
8. Consolidate Your Debt
It may be in your best interest to consolidate your debt. This can usually be done by borrowing money from a bank or private lender. You can use the loan to pay off all of your credit cards at once and then focus on paying one larger loan payment per month.
9. Use “Extra Money” to your Credit Cards
When things like tax returns, birthday money, bonuses or other unexpected monies come your way, don’t be tempted to splurge. Use that money to pay down your cards.
10. Don’t Close the Card
This one is more of a general tip! While it may seem like a good idea to close your card after you’ve paid it off, don’t. Your credit score is based partly on how much credit you have in your name. When you close the card, there is less credit in your name.