If you want to pay off credit card debt, you need to have a good reason to do it. This is not something you can accomplish overnight. You can even expect that it will be very hard to completely get rid of your debt. There will be temptations around you and you will be enticed to spend your money on something else rather than pay off your balance.
Without a doubt, credit cards are one of the top debt problems that consumers should avoid. It is very tempting to use for all purchases. And when you give in, you have to deal with the high-interest rate and the various fees associated with the use of the card. That can quickly bloat the amount that you have to pay. With the high balance and interest rate, consumers are expected to pay nearly $104 billion on all sorts of charges caused by credit card debt within a span of 12 months. That is an awful lot of money to give to creditors. Consumers can use this on a lot of things. They can use it to give their retirement fund a boost. Or it can be used to invest in something that will increase their personal net worth – like buy a house or stocks.
If you do not want your finances to be compromised, you need to pay off credit card debt and you need to act on it fast. Fortunately for you, there are a couple of options for you to do this. But before you get to know the different ways you can be debt free, you need to consider two strategies that will help make it bearable.
2 options to pay off credit card debt
Regardless of how difficult it is to complete a task, it becomes easier if you have the right motivation to complete it. The same is true for credit card debt. With the average debt being $5,472 per borrower, it can be a difficult debt to overcome. However, it is not impossible to do so. You can start by figuring out what is more important to you…
Paying off the debt faster…
If it is more important for you to pay the debt faster, you need to focus on the credit card debts that has the lowest balance. There are many reasons why there is a need to pay off credit card debt faster. Maybe you need to lower your debt significantly so you can get approval for a new loan. Sometimes, your credit score will be given a boost once you have lowered your credit utilization rate. With an improved credit score, you can get a low interest on your loan. This can be very helpful when you want to borrow money to buy a house or a car.
But apart from that, paying off a debt can give you a different kind of motivation. Having one less debt to think about is always a good thing. It makes you feel like you are making a huge progress. That can fuel your drive to pay off all the other credit card debts that you still owe. Once you make that last payment on a debt, there is a certain feeling of thrill and excitement. You can use this positive feeling to motivate yourself to continue paying the rest of your debts.
… or saving while paying off debt?
If it is more important for you to save money while paying off your debt, you need to focus on the high-interest credit card debts. This is an option for those who want to pay as little as possible towards the debt. Paying the high-interest rate debts first will help you get rid of that particular account early. The faster you pay it off, the less finance charge you have to pay for. The drawback here is that you might end up spending a long time before you can completely pay off one account. But if you feel happy with the thought that you will eventually pay less on the whole debt, then this should be a great option to pay off credit card debt.
What happens after you have made your choice?
Once you have figured out what is more important, saving more or paying off a debt fast, it is time to put your debt relief program into action. Knowing your priorities is just the first step. Now, what should your next step be?
First of all, you need to rank your credit card according to priority. If you want to pay off your debts faster, the debt with the lowest balance is your priority. But if you want to save money, you need to prioritize the high-interest debts.
After you have finished ranking the debts, you should list the minimum payment requirement for each. Whatever money you have left after paying the minimum for all of them will be added to the amount you intend to pay the debt on top of your list. This extra payment will help you get out of debt a lot faster. Take note that you need to continue with the minimum payment for the rest of the debt – apart from the one debt at the top.
When the first debt is completely paid off, the amount that is freed will be put towards the payment of the second debt in the priority list. The rest will carry on with the minimum payments. After completely paying off the second debt, you will do the same for the third debt. You will do this until your list of debts is completely paid off.
Of course, paying off your credit card debts should not be the end of your efforts to improve your financial position. To really secure your finances, you need to learn how to use credit cards properly – among other things.
How to avoid too much credit card debt
The secret to becoming financially successful is not in the absence of credit transactions. In fact, you might be surprised to know that those who are really successful are those who are always using debt. They are not afraid to be in debt because they know how to use it to their advantage. And they learned how to pay off credit card debt properly.
In a society that is known to use credit casually, it is quite hard to completely eliminate it from your life. And credit cards are among the most prominent types of debt that are used today. In fact, there are 416.5 million credit cards being used currently. With only 174.9 million consumers accessing credit cards, it is evident that it is a common practice to own more than one card. While there is nothing wrong with that, you need to make sure that you learn how to use your credit cards wisely.
But how exactly can you accomplish that? Here are some tips that you can use.
Plan every expense
This is true for all your expenses but it is more important for any credit transactions that you may have. Planning every expense means you have to include it in your monthly budget. Whenever you do this, you are ensuring that your credit transactions will be paid before the end of the month. If you budget $500 in your credit card, you are free to use the card for that amount because you know you have the cash to pay the balance when the billing statement arrives. It will keep your credit card debt from accumulating to a point when it is hard to pay it off.
Use it with a purpose
Another tip that you should implement is making it a habit to use credit with a purpose. This is one of the things that you need to know about credit cards. The truth is, every expense that you make should help you reach a bigger target. For instance, using your credit card is one way for you to increase your credit score. That way, you can get a good deal out of a mortgage that you need to borrow. Spending credit with a purpose will help motivate you to be responsible with its use. This will help you avoid the need to pay off credit card debt that has blown out of proportion.
When you learn how to use this type of debt properly, you do not have to worry about your inability to pay off credit card debt. You will always have full control over it and it will never put your finances in a dangerous position.