Credit card debt can create an endless cycle of borrowing, interest payments, and credit risk. In some cases, it leads to financial hardships by cutting into your household expenses. In other situations, it may even lead you down the path of bankruptcy.
This makes it crucial to get out of credit card debt in order to live with financial stability. While it may seem easier said than done, it’s also not impossible. To help you along this path, here are a few tips for managing credit card debt.
Never Delay a Payment
It’s pretty easy to think that paying about 10% of your credit card debt per month would not make a difference. But it does have a significant impact on your credit as well as the amount that you owe. Similar to building an emergency fund where you set aside monthly payments no matter what, you also need to pay the minimum on your credit card every month.
Go Beyond the Minimum Payment
In order to truly chip away at your credit card debt, you need to go beyond the minimum payment. This doesn’t have to be twice or thrice the amount of your minimum. Instead, every little bit counts. This also has a positive effect on your credit report by lowering your credit utilization ratio, which should be lower than 30% of your combined approved credit for a good credit score.
Set Up Automated Payments
If you want to make sure that you are never late on your credit card payments, you can set up automated payments on your checking account. On the date you usually get your paycheck, this setup transfers your specified amount to your credit card. This not only saves you from manual transactions and using a reminder app, but also helps you keep on top of your payments.
Look Into Debt Consolidation
Debt consolidation is a type of loan where your debt is paid off by the lender, who then receives monthly payments from your end to settle the loan in a specific period. You can get debt consolidation for your credit card debt through a wide range of lenders. It doesn’t have to be a specialized institution either: Even lenders who market the benefits of credit card points may often offer debt consolidation loans.
Explore the Debt Snowball Method
The debt snowball method is where you prioritize paying off your credit card with the least outstanding balance first. This means that even as you make minimum payments on all credit cards, you do a little more for a specific one. Once that debt is paid off, you add that monthly amount to another credit card’s payments, so on and so forth. You can use a budgeting app to account for these payments.
Consider Paying Off the Most Expensive Card First
In some cases, it might be better for you to pay off the credit card with the most expensive debt. This would be your credit card with the highest interest rate combined with the most outstanding balance. When you make more than minimum payments on this card, you can slowly but surely lower your debt. Once you are done, you can contribute the same amount to one of the remaining cards under your name.
Speak to Your Lenders
Credit card debt is a scary concept. It becomes even scarier when you have multiple cards in your name, all with most of their balance dried up. But similar to speaking to different institutions before you open a high-yield savings account, you can make an effort to speak directly to your lenders. In some situations, lenders might let you pay your amount in monthly payments. But in others, they may simply adjust your debt to a lower amount.
Seek Professional Help
If you can’t seem to pay off your credit card debt no matter how hard you try, it would be time to seek expert help. This can come in the form of a financial counselor or a debt management professional. When you talk to experts, it opens doors to discussions like bankruptcy vs. credit counseling and saving money vs. breaking into your retirement fund. This can help you choose a way out of your financial rut.
By using these strategies, you can navigate the maze of credit card debt without having it take you down with it. This can ensure that you find the financial freedom you deserve.
