We all want to pay off credit card debt. The truth is, you have a lot of options before you when it comes to paying it off. You just have to learn how to distinguish those that will work based on your financial situation. You have to remember that there is no single formula to get out of debt. But there is a perfect solution that is based on your financial position and credit situation. If you want to successfully get out of debt, you have to make sure that you choose the right solution.
According to reports, consumer debt will reach $4 trillion by the end of this year. At present, the average American is already spending 10% of their income just paying off their debts – and this does not even include their mortgage. The 10% includes only student loans, personal loans, car loans, and of course, credit cards. When you add your mortgage, that percentage becomes even greater. The bigger the percentage that is being taken from your income, the more it will feel like you are not improving your financial position. Instead of using your money to invest or grow your savings, you are forced to use it to pay your creditors. Over time, that can get really discouraging.
While paying off the balance of your card can be discouraging, that does not mean we should just give up on it. Failing to pay off credit card debt can be deemed as being irresponsible with payments. It will make your financial situation a lot worse.
5 different strategies of paying off your credit card balance
Fortunately for you, there are specific strategies that will guide you on how you can pay off your credit card balance effectively. Most of these strategies will not just help you stay responsible as you pay off credit card debt. These suggestions will also help you save money as you complete your debt payments.
Reports reveal that the credit card balance in America has reached an all-time high. But that is not what is noteworthy. What caught our attention is the fact that the number of late payments has also steadily risen with that. And we are not talking about the late payments that are a few days late. These are the payments that are late by more than 30 days. With the rising interest rates, this can quickly turn a simple credit card debt into a huge financial crisis. This is why you need to be serious about your intent to pay off credit card debt.
Here are the 5 strategies that you follow when scheduling your payments.
Pay your dues before the due date
This is actually the most basic strategy that you can follow. At the very least, this will help you avoid late penalty fees. When you are late in your payments, that will not only cause your balance to increase. It can also be a negative record in your credit report. If you want to maintain a good standing and clean payment record, you need to keep an eye out on your due date. Make sure that your payments are ready before the due date. Being late for even a few minutes will already incur late fees. If you are running late, try to place a call before the cutoff time on your due date. This may be able to lower the penalty charges.
Pay your dues before the closing date of the account statement
Another strategy that you can use is to pay your balance before the closing date of your account statement. This will lower the balance that will be reported to credit bureaus. This can help improve your credit score faster. Once you have made the payment, avoid using the credit card for purchases – at least until after the closing date.
Pay your dues during the early part of the billing cycle
If your due date falls on a date that is in the latter part of the billing cycle, you need to make early payments. This will lower the finance charge that will be imposed on you for the balance that you have carried over to the next month. Usually, the creditor will use the daily balance to calculate the finance charge. If the balance is lower at the beginning of the billing cycle, the majority of the finance charges will be computed based on that. If you can make this happen, it will help you save a lot on the total debt.
Pay your dues as soon as you receive your paycheck
As soon as you get your paycheck, you may want to use it to pay off credit card debt. Even if your due date is far off, you can pay the debt. That way, you can avoid being late on the payments. Not only that, you can secure the budget for the debt payment. Sometimes, if we are holding on to cash, we forget our other financial obligations. We end up using the money for something else. This will also lower the stress that you are feeling about your multiple payment due dates.
Pay your dues before buying something large and expensive
The last strategy that you should consider using it to pay off credit card debt before you make a large purchase. This will ensure that your credit utilization will not bloat after the purchase is completed. It will keep any effect on your credit score minimal. Not only that, it will keep your balance from feeling too overwhelming.
Your credit card can be a very powerful tool – but only if you know how to use it. People who are confident in using credit are those who are most likely to be a financial success. You do not have to completely stop using debt – you just have to learn how to use it properly.
Why you should pay your credit card debts before the due date
Among all the tips that you will get when it comes to paying off your credit card balance, the one that will help you a lot is paying before the due date. So if you have to choose only one strategy, you might want to focus on paying before your due date arrives. There are a couple of reasons why this makes a lot of sense.
Lower interest rate
Credit cards are notorious for their high-interest rates. According to reports, the average credit card interest rate is currently at 16.71%. And it seems the Federal Reserve is not yet done raising the rates. As the economy gets stronger, you have to expect that this will continue to rise. You need to pay off your credit card balance soon before your creditor raises their own rates. If you are paying your credit card dues before the deadline, the negative effects of the interest rate will not be too high on your account. The finance charge will be lower because you opted to pay your dues early.
Easier to budget
Another reason why you need to pay off credit card debt before the due date is because it is easier to budget. When you get rid of all the payable early, you do not have to worry about spending too much by the end of the month. All the priority expenses like your debts will be paid off. Your discretionary income can be used any way you like without compromising your financial obligations.
Avoid late penalties
If you make it a habit to pay your credit card balance before the due date, you do not have to worry about late penalties. It is one less expense that you have to make. This will increase the savings that you will get on your debt payments.
Free from stress
When your payments are updated, that is one less thing to worry about. It is already stressful to make sure that you have enough money to pay off everything. Once you have all the priority expenses taken cared of, you do not have to deal with the anxiety that comes with having to pay it all off. Financial stress can be a real problem – make sure you do not ignore the negative effects that it can have on your life.