For today’s guest post on getting rid of credit card debt, please welcome Camron Hoorfar from DebtConsolidationCare.
While all loans weigh heavily on your financial health, credit card debts are the hardest to deal with. This is because your interest rates increase over time, and you get into more debt. For these reasons, it’s best to consider debt management plans such as credit card debt consolidation to avoid wasting your money on interest rates.
Work on Your APR
High-interest rate credit cards can negatively impact your financial standing. Luckily, you can use some methods to lower your APR and save money. Typically, experts suggest that you simply call the bank and request a lower interest rate. They will review your track record to decide to approve your request.
If your bank refuses to lower your APR, it’s best to transfer your debt to a balance transfer card. This way, you will get 0% APR for a particular time. Additionally, make sure to opt for cards that don’t require fees or other costs for a balance transfer. If you’re not fortunate enough to get a no-fee card, look for ones that come with a 3% to 5% fee. You need to keep in mind that you have to pay at least half of your debt if you can’t pay off the entire debt before the 0% interest rate feature expires.
Increase Your Monthly Payments
Generally, people wait for the due date to pay their monthly minimum payments. But did you know that it’s not compulsory to make only one payment each month and follow the monthly billing cycle? Remember that credit card interest rates add up on a daily basis. Even the finance charges you may have to pay are suggested depending on your daily balance. In short, with every passing day, you have to pay more in interest than would have been manageable had you not wasted time.
Instead of one, make two payments each month. In fact, you can make even more to pay off your credit card debt. People who get weekly payments can make a debt management plan to pay debts per week. The perk of paying your bills on the spot when you get the money is that you can save yourself from spending that money on other unnecessary things. This way, you don’t miss any payments and get rid of your debt sooner.
Make sure that the total amount of money you pay in chunks is more than or at least equal to your monthly minimum payments. If you fail to do so, you risk facing penalties and late charges. Not to mention, the whole idea of paying your debt will be in vain. Once you cut down on debt, your credit score improves. Since you’re reducing credit use, there’s a high chance that you will get approval for a balance transfer.
Opt for Debt Avalanche
The best way to repay credit cards is Debt Avalanche, which can lift the burden off your shoulders once you start following this financial method. It focuses on paying off balances with the highest interest rate. It allows you to get rid of significant balances, leaving behind smaller credit card debts with lower interest rates (make sure to continue paying the minimum on all your debts while paying extra on your highest interest debt).
Once you are done with the first, pick the next highest rate balance and put your money towards it. When you continue doing this, you will soon get free from credit cards that charge you incredible money. Later, you can start paying off your low-balance credits cards.
Consider Debt Snowball
This method works best for borrowers who find it a challenge to follow a debt reduction plan. Debt Snowball helps you pay off the smallest debts first. This means you have to start paying off the credit card with the lowest balance. After paying off the debt on it, you need to pick the next lowest balance and continue the process until you are free from all debts.
Reducing your balance by paying small debts gives you peace of mind and motivates you to move onto other credit cards. It will give you a mental reward, which will lead to quick results. This technique might not be as effective as debt avalanche, but if it’s helping you stay on track, then why not go for it.
Consolidate Your Debts
Credit card debt consolidation allows you to easily manage your debts and high balance. In this case, you need to take a line of credit or personal loan to consolidate all your credit card debts. The best part of this technique is that you get a lower interest rate on your consolidated debt. This way, you will be able to convert the combined interest rate of 15% on your credit cards to a loan that requires an annual interest rate of around 4% to 8%.
While debt consolidation saves money on the interest rate, you need to avoid spending money on other unnecessary expenses. Make sure that you use your savings to pay your debts rather than increase them. Lastly, you need to choose the right personal loan that’s best for your situation. In this case, hire a finance expert who can provide guidance on the best loans for you and how you can benefit from them.
Credit card debt consolidation, debt snowball, and debt avalanche are among the most common ways to tackle credit card debts. On the other hand, making additional monthly minimum payments and lowering your APR will also work best for you. Make sure to choose a method that is accessible for you instead of one that increases the amount of interest you have to pay.
If you are confused between different methods, take advice from professionals in the field. They can help you understand the perks and drawbacks of each method. Besides that, they can also guide you on managing your budget to eliminate debts.