SUMMARY: Do you have credit card debt? These six steps from TDECU will help you pay it off and get out from under credit card debt in no time.
There are some dependable ways to wipe out credit card debt. The method that works for you hinges on: the amount of debt you have, your credit story, and what will help you stay motivated.
#1. Always do the basics
- Always pay your credit card bill on time.
- Always pay at least the minimum amount due.
But to pay off debt quickly, you’re going to have to do a little more.
#2. Rework your budget
One of the easiest ways to quickly pay off credit card debt is to toss more money at it every month. This means finding new ways to save. Begin by categorizing your monthly spending, for example, food, housing, and fun money. Next, look for places where you can cut back, like canceling your Hulu subscription or getting fewer fancy coffees before work. Then take the money you’ve freed up and apply it to paying down your debt. Anytime you can make more than the minimum payment, you’re closer to being debt-free.
#3. Make an extra monthly payment
Credit card interest is compounded daily. So the more often you can make payments, the more you’ll chip away at growing interest. For instance, if you get paid every two weeks, making two payments a month might be feasible. If you find you make spontaneous purchases after payday this may be a useful method for you, because if you use that impulse money to pay down your credit card balance, you won’t have the chance to spend it elsewhere.
#4. Pay off one debt at a time
When you have more than one credit card with debt, it’s important to focus on one card at a time to pay down to zero. Of course, you’ll still need to make the minimum payment on time for your other credit cards.
Use one of these tactics to decide which card to focus on first:
- The debt avalanche method focuses on paying off your card with the highest interest rates first and then moving to those with lower interest rates. If you’re worried about interest adding up, this may be the strategy for you. But if your account with the highest interest rate also has a large balance, it may take a while to pay it off. So while you may not get the quick wins that help create a sense of accomplishment, you could save money in the long run.
- The debt snowball tactic may be a better strategy if you need to see progress quickly to stay motivated. This tactic focuses on paying off your smallest debts first, then taking the money you were paying for that debt and using it to pay down the next smallest balance, and so on. The debt snowball method is effective because you’ll likely see progress quickly. This can help you stay driven—your eyes never wavering from that debt-free goal.
#5. Combine and overcome
Consolidating your debt can let you combine several higher-interest balances into one with a lower rate, so you can pay down your debt faster without increasing payment amounts. Plus, fewer outstanding balances may make the process seem less overwhelming. Here are two ways to consolidate:
- If you have good credit, you could take advantage of a low balance transfer rate and move debt from high-interest cards. Be aware that balance transfer fees are often 3 to 5 percent, but the savings from the lower interest rate may be greater than the fee.
- If you don’t have excellent credit, applying for a personal loan and paying off your credit card debt in full might be your best option. You’ll still be paying interest, but most likely at a lower rate.
#6. Contact the experts
If you’ve tried the methods on this list and are still struggling to get your credit card debt under control, it might be time to call in the experts. Nonprofit credit counseling services will look at your credit card debts along with your other financial obligations, like a car payment or student loans, and work with you to create a repayment plan. Some may even work with the credit card companies to get you a lower interest rate.
Ready to start a conversation on how to improve your finances? Connect with a TDECU representative today.