Do you find that you never seem to get out of credit card debt no matter how hard you try? If yes, you are not alone.
Statistics indicate that a staggering 55% of people have month-to-month credit card balances. 40% have not been debt-free since 2018. 15% go back as far as 2006.
What is interesting to note is that you can be debt-free with the right strategies. In most cases, it requires taking a good look at how you spend your money.
Do you spend more than you bring in? Do you have a budget to help manage finances?
We will share practical ways to pay off credit card debt with ease. And by adopting these strategies, you can avoid finding yourself in the same situation again.
1. Take Stock Of Your Overall Debt Portfolio
Managing your credit card starts with taking stock of your overall debt portfolio. Get a notebook ready for this part.
List down all your debts, no matter how insignificant you think some of them are.
Having clarity on how much you owe should put you in the right frame of mind. If you have a problem getting an overview of your expenses, tools from our partner, Chunk Finance, will be useful.
The platform provides a fantastic way to take control of your resources. You get:
- Credit utilization tracking to keep your credit score strong
- Timely notifications around finances. These include spending thresholds, balance updates, and overdrafts
- Visual representation of expenditure using charts and graphs
- Excellent tips on debt payoff and minimizing interest rates
- Insights around expenses or spending, and so much more
2. Draw Up A Budget
If you find yourself in debt, it means more money is going out than coming in. A budget is an excellent way to limit your spending.
You can realize significant savings by cutting out some of the expenses.
Stop going to restaurants for fancy meals. Think about cooking at home a little bit more. Or cut down salon or beauty shop treatments with DIYs.
The budget should have priority items at the very top. It should cover the necessities like utilities, rent, or mortgage.
Also, add in the obligatory items, including minimum payments on credit cards. Make sure you also put aside something for savings or emergency plans.
To stay true to the budget, do not deny yourself everything. Allocate a small amount for the occasional night out or a new outfit.
3. Consider Different Credit Card Debt Repayment Strategies
There are several strategies you can use to repair credit card debt.
1. Debt Avalanche Method
Do you want to know how to pay off debt fast? Try the debt avalanche method. It requires you to take care of high-interest rate debts first.
Start with making minimum payments on all outstanding debts. Now, allocate extra money to the credit card with the highest interest rates.
The advantage of this method is you can effectively minimize the interest you will pay in the long run. Taking care of the high amounts makes it easier to clear the debt faster.
The downside is that you need a lot of discipline and commitment. It can be easy to divert the extra funds to other areas.
2. Debt Snowball Method
The debt snowball method is on the opposite spectrum to the avalanche method. Like in the case above, you make all minimum payments on outstanding debts.
Next, allocate any extra to the lowest interest rate credit card debt. The debt snowball method is the best for those who need a little motivation.
Every time a debt comes off your list, there is a great sense of relief. It is also a great way to pay off debt fast with low income.
The disadvantage is that overall, you may end up paying more in interest. Remember, the high-interest credit cards are still accumulating interest over the debt repayment period.
3. Debt Consolidation
Debt consolidation is bringing all your debts together and making them one. It could be in the form of a personal loan that has more friendly repayment terms.
With a good credit score, it becomes easier to negotiate better rates.
The main advantage of this method is that it makes the debt more manageable. Every payment goes towards reducing the balance.
4. Credit Card Transfer
Balance transfer credit cards offer zero interest rates during the introductory period. Some lenders will give 12 months. Others can go up to 21 months.
Transferring high-interest rates to the 0% interest cards can give you a lot of breathing room.
Since you will not be paying interest at this time, you can make a big dent in your credit card debt.
Now here is where discipline and commitment should come in. take that money you would have been paying as interest and put it into the debt.
You will see a significant reduction in the amount you owe.
5. Renegotiate Loan Terms
Always remember one thing. Creditors want their money back. That means they can be pretty flexible in helping clients make repayments.
Do not be shy about renegotiating the loan terms with your creditor.
Of course, they will be more lenient if you have a good track record of repayments. Some can adjust the interest rates or waive specific fees.
Other lenders have a credit card hardship program. It can provide relief during tough economic times, making it impossible for you to keep up with the payments.
To find out if your issuer offers such because not all do.
Final Thoughts
Paying off credit card debt can be easier with some of the strategies we have shared above. Begin the process by having clarity on your financial situation. And, that means listing all the debts you owe.
Draw up a budget that will guide your spending. Cut out any unnecessary expenses to save a little bit more.
Find a repayment strategy that works for you. Avalanche and debt snowball can be pretty effective. But you will need discipline and commitment.
Any spare cash goes back into the debt. Debt consolidation means combining the loans and paying them off as one.
Finally, negotiating favorable interest rates can help you clear the loan faster.
