Nearly half of Americans have credit card debt, which is roughly 120 million people. Using credit cards can seem convenient and can be a life-saver when you’re in a bind, but racking up credit card debt can have some serious consequences. Credit cards typically have the highest interest rates of any type of debt, can have a negative impact on your credit score, and be a big burden for your mental and financial health. Luckily, though, you don’t have to carry credit card debt forever. Let’s take a look at seven tips to help with paying off debt so it can stop weighing you down.
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There are a number of different strategies for paying off debt. One of these is the debt avalanche method. The plan here is that you make minimum payments for all of your debts. Any remaining money you have leftover that you’ve set aside for paying debt can then go to the bill that carries the highest interest rate. Once that debt is paid off, you can move on to doing the same with the next highest interest rate debt, and so on, until you are totally debt-free. This method is the best way to save as much money as possible on your interest payments. Many people don’t fully understand the implications of using credit cards and the fact that you can end up paying a ton of money in interest over time. By tackling the highest interest rate debt first, you can pay the smallest amount of money possible in total.
The debt snowball method is similar to the debt avalanche method except that you focus on paying the smallest debts first. Rather than starting with the biggest debt or the debt with the highest interest rate, this method relies on the momentum you’ll build as you start to realize you’re knocking down your debt. Your smallest debt might not be very large at all, but the satisfaction of paying it off will help give you the drive to deal with larger debts. It’s easy for debt to be overwhelming and to want to avoid or ignore it. When you start small, you get a taste of what it could be like to be freed from the burden of credit card debt.
If you have a high credit score but also high debt, you might consider a debt consolidation loan. What this does is bundles all of your debts into one place. This means every month you only have to make one payment, which can be simpler and psychologically less stressful. You might be able to get a personal loan with an interest rate that is lower than those of your credit cards. This means that you won’t have to pay as much interest over time.
When you are struggling with credit card debt, it might seem like the wrong idea to apply for another credit card. However, many balance transfer cards offer temporary 0% APR interest rates, meaning that you can save money on interest while you knock down your debt. This is a form of debt consolidation that can both save you money on interest and simplify things when it’s time to pay your bills. Remember, though, the low-interest rate period typically expires after a number of months. If you want to avoid paying any more interest on your debts, you’ll want to pay them off before that time period ends. You’ll also want to be careful not to rack up more debt on your cards now that you’ve moved your existing debt to the balance transfer card.
You’ll want to take a look at how much money you make every month and how much money you spend. Break your expenses up into essentials and nonessentials and budget an appropriate amount for each category. Sometimes simply looking at your cash flow can help motivate you to move beyond your sources of debt.
If you aren’t interested in using one of the aforementioned debt methods, you can also always pay a bit more than the minimum on your debts. While this isn’t going to get you out of debt fast, every little bit helps. When you find yourself with a little extra cash, throw it towards your principal balance rather than a fancy dinner out.
You can change your relationship with debt by either saving more money, making extra money, or both. Depending on how motivated you are to get out of debt, you might consider working a side gig for a while and adopting frugal habits. Things like shopping at thrift stores instead of Amazon, cutting down on subscription services, meal planning and prepping, and selling things you no longer need can all contribute to paying off your debt.
It can seem like paying off debt will take ages, but with some organization, planning, and discipline, you can live a debt-free life once again. An important aspect of dealing with credit card debt is being realistic about how long it will take you to pay it off entirely. Depending on your financial situation and how much debt you have, it might only take a few months or it could take several years. Are you ready to begin your journey toward financial stability? If so, contact us today about a debt consolidation loan!
Michael is the Chief Revenue Officer and co-founder of Prudent Financial Solutions. Michael’s career in the FinTech space began in 2015 as a Financial Consultant at Strategic Financial Solutions. Michael quickly became a top producer in the organization. He served as a member of the internal advisory board that helped streamline processes and drive organizational change. He later joined Premium Merchant Funding, an alternative lending firm that specialized in small and medium business financing. Michael served as Managing Director of G&G Funding, where he managed a full sales team and was responsible for driving revenue. Michael graduated from Providence College with a Bachelors of Science in Finance and Accounting.