Have you found yourself in credit card debt? If so, don’t worry – you’re not alone.
Researchers estimate that as many as 50% of U.S. households have credit card debt. I know from personal experience how it feels, because I had a $3,000 balance on my own credit card as recently as last year. It wasn’t easy, but I paid it all off and along the way I learned some important lessons about credit cards.
Below, I’ll share 4 tips that can help anyone pay off their credit cards:
1. Focus On The Highest Interest Rate First
There are a couple different strategies when it comes to paying off credit cards. One strategy is to take aim at the card with the lowest balance – in other words, the one that can be paid off the quickest. While this strategy can work for some people, a better option is to focus on the card with the highest interest rate, especially if that rate is 15-20% or more.
The reason you want to eliminate that high-interest debt first is it will save you a ton of money over the long run. There is little reason to leave that high-interest debt festering and building up more and more interest charges. Instead, just dedicate all your extra money and all your attention to destroying the highest-interest debt. And in the meantime, pay the minimum payments on your other debts to avoid any fees or penalties. Once you’ve destroyed the first balance, move on to the balance with the next-highest interest rate. For more tips on how to do this, check out our Credit Card Debt resource center.
2. See If A Balance Transfer Could Help You
If you happen to have a really high interest rate on one (or several) of your cards, you should consider doing a balance transfer. The term “balance transfer” means switching your credit card balance from one credit card to another one, usually with an entirely different company. For example, you might transfer your balance from a Chase card to a Citi card, or vice versa.
With a balance transfer, if you have a high credit score, you can sometimes get a much lower interest rate than what you have currently. The way it works is you will usually have to pay a fee up front (about 3-5% of your balance) and then get an introductory period with no interest, which can help give you the incentive to pay off that debt rapidly. It’s really important to read the fine print on balance transfer offers, though, because some of the offers have hidden fees.
3. Find New Ways To Save Money
In order to get your credit cards paid off as fast as possible, you’ll need to maximize your income every month, and that means finding new ways to save money. It’s always a good idea to have a monthly budget or spending plan. If you don’t have one yet, it’s time to create one, so that you can see how much of your money goes to each category of spending in a given month.
Once you can see where your money is going, you’ll be able to identify areas you can cut back on. For example, if you are spending $400 at the grocery store each month and spending $300 eating at restaurants each month, then you can no doubt save money on food by cutting down on the number of times you eat out. You must change your habits in order to save – try planning your meals ahead of time and going to the grocery store with a list of ingredients that will get you through the entire week on home-cooked food. If you can make it a habit, you’ll begin saving money each month that can go toward debt.
The same is true if you realize that you’ve been spending lots of money on things like clothes, music, or anything else that qualifies as a “want” instead of a “need.” Change your habits to avoid the stores or websites that are tempting you to spend, and you’ll be able to save more. For further advice, check out our Budgeting Tips resource center.
4. Get Support To Boost Your Motivation
One of the biggest obstacles to actually paying off your credit cards is the fact that it’s so hard to stay motivated. Let’s be honest: paying off debt can be hard. So how do you keep your focus and persevere until you reach your goal of being debt free? We’ve found that sharing your goal with others is a really important part of the process, because it gives you a support network of people who can give you encouragement during the hard times, when you feel like stopping or giving up.
Decide on a few people you can trust to be positive and to treat you well, and tell them your goal. Then ask them to help you stay on track! As an alternative, or an added boost, write down your goal on a piece of paper and add a photo to remind you of what you’re striving for. Put it somewhere you’ll see it often, and it will help you stay focused throughout your journey to being debt free.
Hopefully these tips will help you pay off your credit cards faster than you even think you can! Let us know in the comments if you have any questions. You can also check out these additional tips on how to get out of debt which may be helpful if you have other types of debt besides credit cards.