3 Ways To Pay Off Your Credit Card Debt Faster
One thing that is certain to give you stress is debt. Specifically credit card debt. If this is a stress in your life you are facing, take some solace in the fact that you are not alone. According to CreditCards.com, the percentage of U.S. households revolving credit card debt from month to month has been rising recently to 38 percent.
Just because something is becoming more commonplace though does not mean that you have to just resign yourself to always being in debt. Even if you do not think you have enough extra money to pay down your credit cards, the truth is you can. Not only can you pay them off. You can pay them off faster.
Today we want to share with you three tricks you can use to pay your credit card debt down faster.
Tip #1: Look for lower interest credit card rates and start paying the debt down faster
The first thing you want to do is call each of your creditors to negotiate lower interest rates on your credit cards. With lower APR, more of each payment you make goes towards repaying the principle, rather than accrued interest charges. Next, what you want to do is use any extra cash you may have to make credit card payments in the biggest chunks you possibly can.
Creditors are more likely to negotiate lower rates with you if:
1. You’ve been a loyal customer for many years
2. You make your payments on time every month
3. Your balance is current right now
4. Your credit score is higher than when you applied for the card
Finding out if you qualify for a lower interest rate is easy. Simply find the 1-800 number on your credit card statement and inform them of your desire. They may have to hand you off to one or two other people higher up the food chain that are able to authorize lower interest rates, but don’t get discouraged. Stick with it. It’s a good idea to know current average credit card interest rates for each card you hold. Knowing this information will give you a reference point as to whether or not the lower interest rate they are offering you is actually a good offer.
Once you lower the rates, you need to make a plan. You need to organize all your credit cards and put them in order of how you are going to pay them off. The first step is to make minimum payments on all cards except one. Generally that would be the one that has the highest interest rate out of all your cards. Once you have them in order, you’ll put as much extra money towards that one card, every month, paying it down as fast as possible.
The once you pay off the first card, you move on to the next. Each debt you eliminate frees up more cash for tackling the next debt. You accelerate debt repayment until you reach zero on all your cards.
Tip #2: Use another credit card to pay off debt
This may actually sound like the opposite of what you would want to do, but believe it or not, you can use a credit card to solve problems with credit card debt. For instance, if you transfer your existing balances to a balance transfer credit card that offers 0% APR on any new balance transfers. The APR rate on these promotions will vary, but can help you out. The higher your credit score, the longer the promotional APR will be. With excellent credit, you may be able to find cards that offer 0% APR for 18 to 24 months.
Doing this allows you to pay off credit card debt interest-free for a time. That way, every dollar of each payment you make goes to reducing the principal debt you owe. So, for instance, let’s say you have $5,000 in debt to pay off. You get a balance transfer credit card that offers 0% APR for 24 months. With payments of $288 per month, you can be debt free before the introductory period ends.
Tip #3: Get a loan to consolidate and pay off credit card debt
If you have too much debt to eliminate during a balance transfer on your cards, have hope. Not all is lost. You could consider taking out a debt consolidation loan to pay off your credit card balances. Personal loans tend to have interest rates that are less than 10%, which is much lower than most credit cards. A higher credit score allows you to qualify for the lowest rates possible.
In general, you should only use an unsecured debt consolidation loan to consolidate credit card debt. While secured debt, such as a home equity loan might sound like a tempting way to pay down debt, this is not the best practice. Doing that converts unsecured credit card debt into secured debt. You increase your risk because if you default on a home equity loan, you can put yourself at risk of foreclosure.
When selecting your consolidation loan, you typically want to aim for a term of less than 60 payments as the sweet spot. Any less may be too expensive for your budget, while any more would take too long, leading to higher costs.