Gone are the days when expenses can be paid for with cash. Credit cards have become the norm all over
the world. However, while its use has become a standard, people are still struggling when it comes to paying off their credit. At a glance, it seems easy to use a credit card and then choose to pay it off afterwards. However, the convenience and the freedom to acquire things you cannot afford with a credit card leads users to take on more debt than they can tackle. Some use credit cards during emergencies rather than cash, and it can be quite costly. Furthermore, high interest rates take a heavy toll on payments and make them harder to pay off. Grace periods where interest rates are zero are temporary – their initial appeal leads individuals to hastily acquire a card and regret the impact of the rates afterwards. Here are tips and tricks on how to eliminate credit card debt and ensure a healthy credit rating.
Add Up All Your Debt
It is important to know where you stand when it comes to credit card debt. By knowing your balance, you can monitor your finances and see the best way to take advantage of your credit. It also helps you figure out how much you should use your card and plan a budget. If you have no idea how much you owe in total, try obtaining copies of your credit reports from credit reporting agencies or review your credit card statements. Another option is to contact your creditors and inquire about your outstanding debt.
These methods can also inform you of any debt that you may have missed or was unaware of. Additionally, it helps you assess your credit and dispute for possible errors. After adding up all your outstanding credit, you can then make plans on how to pay it off effectively.
Pay The Card With Highest Interest First
When it comes to relieving yourself of debt, it is necessary to figure out which payments to prioritize first. Organizing your debt will help you analyze your options better. Try creating a spreadsheet containing relevant info about your debt – the name or type of the card, your current balance, interest rates, minimum payments, and the due dates.
An efficient method of paying off credit is to prioritize the card with the highest interest rate. Higher rates mean a larger interest stacked up on your balance, making your overall payments longer and total payments larger. By eliminating the cards with the highest rates first, you are reducing the stress on paying off for your entire debt in the long run.
Set A Budget
A budget will assist you in setting aside money used to pay off your debts. Tracking periodic income and expenses provides information on how much money you have left over. This surplus is the extra amount of cash that you can use for your payments. Spending less on luxuries, saving up on electricity and other utilities, as well as other money-saving methods will give you more surplus.
If you find that your surplus is not sufficient enough to at least pay for your minimum payments, it may be time to re-evaluate your spending habits or look for more ways to earn money. It may take a little sacrifice on your part to resist pocketing that money and paying for your debt instead, but you’ll find that it can be very rewarding, especially when you finally manage to pay off a credit card completely.
Stop Using Your Card
Not using your card is the easiest way to eliminate credit card debt. Even if you are working hard in working towards paying off your debt every month, it would serve little purpose when you continue to add to that debt. Stash your cards at home and adapt to paying with cash. Paying with money helps you become conscious of your spending and adds discipline to your saving habits. Research has shown that people who pay with credit cards are more likely to pay for twice as much for a similar item that can be bought with cash.
Controlling the urge to use your cards will reduce the time it takes to pay off your balance. But don’t be tempted to close your card even if you’ve paid it off – part of your credit score is influenced by your credit utilization ratio. By closing the card, you are putting less credit on your name and can hurt your credit score.
Pay Off One Card At A Time
To reduce the stress of having to simultaneously worry about debt in different credit cards, make it a point to tackle one card at a time. Worrying about paying it all off at the same time only puts strain and pressure on you, and can even affect your financial decisions.
Pay off one card at a time, focusing on the one with the highest rates, while making the minimum payments for the rest. Through budgeting, you can split up the surplus among the minimum payments and putting the rest into the one with the highest rate. After paying off that card, you can move on to the next one. In case rates are equivalent for two cards or more, pick the one with the higher balance as it will accumulate more interest than the others. This method, along with not using your cards for that duration, ensure a faster and less stressful payoff.
Get Professional Help
Sometimes, it can be hard to tackle the issue of credit card debt even with the employment of the strategies mentioned before. It may be because of your present financial circumstances, or simply because your outstanding debt is too high to manage by yourself. When the steps provided can only serve to mitigate the problem, it may be time to get debt help.
There are many debt relief programs available nowadays, and even in the internet. These programs have debt relief advisors that will help you settle your credit and negotiate with creditors in dealing with your debt. The advantage of debt relief programs is that they could help you avoid bankruptcy. Bankruptcy may be a solution, but it can follow you for the rest of your life and have a huge impact on your credit rating. Debt settlement helps you avoid this blow. Debt advisors find ways to relieve you of overwhelming debts through different strategies tailored to your financial situation. These strategies also encourage credit payment in less time. When you find it hard to deal with the problem by yourself, debt help reduces the headache of credit card debt.
Credit cards are easy and convenient to use, but the tendency to partially pay for debt in increments can put users in a tight situation. There are situations where following the right strategies can help you get over the credit card debt rut. But when things become too messy to handle, there’s no need to hesitate to get help in handling the issue.