Four Top Tips From Personal Finance Experts On How To Pay Off Credit Card Debt
Credit card debts are one of the most frequent financial issues, and they can quickly become overwhelming if you don’t keep track of your expenditures.
When you are not on the watch out, credit card debt may seem like it takes on a life of its own, and it’s all too easy to add to it—a lunch out, a little retail therapy, tracking reward points for an airline, and even more splashing out on that trip—much more often adds up. Even worse, you realize you’re doing it on many cards.
However, you should take a step back and devise a strategy for paying off the debt you’ve acquired. The Independent spoke with three financial experts on the best way for dealing with credit card debt.
Determine Your Total Debt And Set A Debt-Free Date
To begin repaying your debt, you must first determine how much you owe. Make a basic spreadsheet or a personal financial service like Mint to track all of your credit cards, balances, and interest rates.
This will assist you in understanding the scope of the job at hand and enabling you to focus and measure your progress. You might be amazed at how soon you can start paying off your debts and how much of a difference a few minor adjustments in your lifestyle can make if you utilize even little sums to pay off your debt.
Danetha Doe, the developer of Money and Mimosas, advises that you need to make a deadline when you’d want to clear the debt. After deciding the deadline, analyze the process to find out the amount you need to pay every month plus the compelling method you’d prefer to employ on the payment.
Select A Debt-Reduction Strategy
There are various approaches to debt repayment, so select one that you believe will work for you. The first strategy is called the avalanche method—beginning paying the credit card debt using a higher interest rate while, on the other hand paying the lower amount on other cards. Ms Doe explains that you avalanche other monthly payments to the following credit cards after paying your first card.
CEO and the creator of WealthWise Financial Services, Loreen Gilbert, says that people have various ideas on managing credit card debts. Some advice paying off the lowest debt first because it’s an achievement, but targeting the one with the most interest is more sensible.
Another technique is the “snowball method, “ which first refers to repaying the card with the lowest balance. Similarly to the avalanche technique, you pay the minimal amount on any other credit cards you have, and then once the first card is paid off, you snowball those monthly payments onto the next card.
The author of “I Will Teach You To Be Rich”, Ramith Sethi, is a great enthusiast of this approach and adds that if you feel like you’re not moving ahead of your bills, it’s a simple way to acquire a sense of accomplishment in what for many is an uphill fight.
He recommends paying an additional $50 every month through savings or by earning from a side job. Most essential, pretend that your other cards don’t exist while paying the minimum on them to avoid incurring extra debt.
Consider Transferring Your Balance
There’re credit cards that allow you to transfer your balance to a 0% interest credit card, depending on your credit score. However, the 0% interest only lasts for a short before the interest rates skyrocket.
According to Ms Gilbert, most people who live beyond their means depend on credit cards to facilitate their lifestyle and then hope to move the credit card to 0% interest rates. But the rates don’t remain low forever. So, controlling your spending is the all-time solution to getting rid of credit card debts.
But if you change the balance to a 0% offer, she advises that you keep the same payment from the higher interest card you were required to pay to clear the debt faster.
Be Frugal With Your Money
Utilize the time you pay off your debt to establish new financial guidelines that will hopefully put you in a better financial position.
Ms Gilbert suggests that you should stop using credit cards entirely until they have paid them off. According to studies, people spend about 20% more while using credit cards than when using cash. So if you want to dodge overspending, pay with cash.
She added that, by the time the credit card is completely paid off, it’s likely that you’d have developed a new habit and may no longer have the urge to use the card.
According to Mr Sethi, if you’re facing the challenge of abiding by your debt pay-down plan, you need a system such as the conscious spending plan. He was referencing the approach of scheduling out precisely how you’re going to spend in advance and sticking to the program.
Alternatively, you can negotiate your salary or rent in an attempt to unlock more income. Mr Sethi concluded that by learning more, you’d pay off your debt faster than anticipated.
Denzil is an experienced writer and a procurement graduate on a mission to eliminate poor regurgitated content while advocating for top-notch digital content. When he’s not writing, Denzil joins the rest of the world watching the English Premier League games.