6 Tips For Paying Off Your Credit Card Debt

July 21, 2014, Written By John H. Oldshue

If you are looking to pay off your credit card debt, you are making the right financial move. It is easy for manageable credit card debt to turn into an overwhelming situation. But the good news is that you can decide when you’ve had enough—and when you are going to start making the moves necessary to pay off your credit card debt and clear up your financial future. The first thing to realize is there are no quick fixes—getting in debt can be a fast process, but leaving debt behind is much more difficult. You will need to outline a strategy and create a budget that you can live with. If you can live with a regimented lifestyle, then you can start to pay off your debt. But what matters more than a strategy is motivation. You’ll need to be self-motivated to pay off your debt—other people aren’t going to make your payments for you. With effort, a strategy and some motivation, you can get out of debt and put your money to work for you.

Utilize The “Snowball” Effect

The “snowball” effect can be extremely useful when paying off loans. It refers to the method of paying off the smallest debt first, and moving from smaller to larger debts. This process can be very motivating, and motivation is one of the biggest factors when it comes to paying off debt. If you believe paying off small balances will motivate you to tackle larger ones, then this strategy might be the right choice for you. If you would rather spread your payments throughout your various balances or you want to pay the highest rate balances first, then this is not the best option.

Pay Off The Most Expensive Balance First

When we say the most expensive balance, we are actually referring to the balance with the highest interest rate. High interest rates can quickly turn manageable debt into something that is out of control. If you use this strategy, you will be paying off the balance with the highest interest rate first, followed by the balance with the next highest rate. While this strategy might not seem as satisfying as the “snowball” effect, you are saving yourself valuable dollars in the long term. This strategy is for those who are looking to be the most cost efficient in paying off debt.

Utilize Balance Transfers

Balance transfers can be very effective for managing debt—especially if you are transferring a balance to a new account with a much lower interest rate. However, balance transfers can have fees of up to 3% of the amount you transfer, so make sure the lower interest rate is worth the cost of the transfer. Don’t forget about your debt after you transfer the balance. Make sure you draw up a plan so you are making payments each month and sticking to your plan.

Consolidating Your Debt

Consolidating your debt can be an option for those who want to simplify the process instead of dealing with numerous open accounts each month. Consolidating your debt is something you should talk over with a financial adviser, because the consolidation process can leave you with higher interest rates. Make sure you will be able to afford the consolidated interest rate before you make the switch. You don’t want to jump in without knowing the risks, because you can’t “un-consolidate” your loans after the process is completed.

Create An Emergency Fund

Creating an emergency fund will allow you to take care of unexpected expenses without incurring more debt. This is critical to staying out of debt and maintaining your lifestyle. Ideally, you’ll want to keep at least several month’s worth of pay saved up for a rainy day. Make sure you aren’t dipping too far into your savings to pay off your debt.

Stop Acquiring New Debt

You don’t need any new credit cards when you are already deep in debt. You need to find a way out first. Acquiring new debt isn’t going to help you get out of old debt—it will only make the situation worse. Instead, you should focus on curbing your credit card usage as much as possible, and if you can, stop using your credit cards altogether. You can then focus on paying off your debt without worrying about how to pay new credit card bills.

Paying off your credit card is not an easy process. In fact, it can be a very difficult, frustrating and time consuming one. But once you complete the process, you will reap the financial rewards of not sacrificing your hard earned cash to creditors every single month. Picking a strategy to pay off your debt should depend on your personal lifestyle choices. If you like for things to be simplified, maybe you should consolidate your debt so you only have to worry about one payment each month. Perhaps paying off the smallest balance motivates you to tackle the other debt. You’ll want to pick a strategy that not only fits your lifestyle, but motivates you to keep going when things get difficult. Having the courage to push through those difficult times will determine if you will be successful. It’s one thing to pick a plan, it is another thing to stick to it. Make sure you remain dedicated throughout the process, and you will be debt free before you know it.

Imagine what you can do with the extra cash each month? It is time to take that dream and turn it into a reality.

The information contained within this article was accurate as of July 21, 2014. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.

About John H. Oldshue

John Oldshue is the creator of LowCards.com. He worked for over 15 years in television and won an Emmy award for his reporting. He covers credit card rate issues for LowCards.com.
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