How to Manage Credit Card Debt in a Few Simple Steps
Credit card debt is a common problem that can be stressful and overwhelming. Credit cards are a convenient way to finance emergencies and major purchases, but many people use credit cards whenever they need or want something. Relying too heavily on credit cards can leave you with a mountain of debt that keeps you up at night. Here’s how to manage credit card debt in a few simple steps.
To make a plan to get out of debt, the first thing you have to do is stop spending and using credit cards to pay for everything. Avoid impulse buying and if you have a balance on one or more credit cards, don’t use your card again until what you’ve already charged has been paid off.
Pay More Than the Minimum Payment
The minimum payment that credit card companies charge is a very small percentage of the balance. If you pay only the minimum payment each month, it will take you many years to pay off the balance, especially if you continue to use the card. In the meantime, interest is accruing on the balance that you’re carrying. Pay more than the minimum payment whenever you can.
Strategies for Paying Back Credit Card Debt
There are two strategies that are commonly used to pay back credit card debt. One is called the snowball method, and it’s done by tackling the card with the lowest balance first and putting any extra money you have toward that card. Once that card has a zero balance, put any extra money you have toward the card with the next lowest balance. Using this method can help you to stay motivated whenever you’re able to pay off one of your cards.
The other method is known as the avalanche method. Instead of focusing on the total amount owed, compare the interest rates being charged on your cards and work on paying off the card with the highest interest rate first. You may not see the total balance owed go down quickly using this method, but you’ll save money on interest charges.
Look for Ways to Save Money on Interest
Finding a way to save money on interest charges can shorten the length of time it takes to pay back the balances owed on credit cards. Watch for opportunities to transfer a credit card balance to a credit card that has a 0 percent interest rate for a year or more. Another option is to consolidate your credit card balances into a personal loan.
To qualify for credit cards with the best incentives or for personal loans at the lowest rates, pay your bills on time and avoid overborrowing. It’s also important to review your credit report periodically to make sure the information on it is accurate. Also, make sure to dispute errors you find right away.
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