Credit card debt is a financial plague because it can quickly get out of hand due to high interest rates. However, sometimes it can be difficult to avoid getting into debt. This was especially true for many Americans during the coronavirus pandemic, as spiraling unemployment and stay-at-home orders created widespread financial hardship. If you find yourself burdened with credit card debt for any reason, take a look at these tips to help you pay it off faster.
Stop using your cards
It’s hard to pay off your credit card debt when you keep using it. For those in the midst of a financial crisis, this can be hard to avoid, but if you only spend on your cards out of habit, you may never get out of it. If you really want to pay off your credit card debt, switch to cash or, at the very least, spend only what you can afford to pay each month.
Simply paying off what you spend on your credit cards isn’t enough to get you out of debt. You will need to increase the amount you pay if you want to make progress in reducing your debt. It can also be difficult to do if you’re struggling financially, but think about how you can cut your budget to get as much of your credit card debt as possible. Even an extra $ 10 or $ 20 per month could help lower the long-term cost of your credit card debt.
Use a 0% balance transfer offer
If you can’t quite pay off your debt right away, you can at least save time by taking advantage of a 0% balance transfer. Typically, these types of balance transfer offers last for one year, and sometimes up to 18 months. If you’re temporarily behind on your debt repayments but anticipate better times ahead, this might be the kind of respite you need. Keep in mind that most balance transfer offers advertise a 0% rate but also charge a 3% to 5% fee at the time of transfer.
Consolidate into a lower cost loan
Rule # 1 when it comes to paying off credit card debt is to stop the bleeding as soon as possible. In addition to stopping your credit card spending, moving your balances to a lower cost loan can be a temporary help. Even though you’ll continue to earn interest on your debt, lowering your interest rate can help slow the compound effect. For example, if you have $ 10,000 in 18% credit card debt and consolidate that into a 6% personal loan, you could save $ 1,200 per year in interest charges.
Negotiate with your creditors
Most people accept the interest rate set by their credit card company without thinking twice. But you might be surprised to learn that you may be able to negotiate that interest rate down. While you may not always be successful, it never hurts to ask, and if you are a long-time customer with a solid payment history, your odds may increase. A reduction of a few percentage points on your interest rate could save you a lot of money.
In the worst-case scenario, in which you simply cannot pay your cards, you may be able to achieve some type of negotiated settlement with your creditors. This will damage your credit score, but can be a way to reduce your overall debt and put in place a reasonable long-term payment plan.
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Last updated: September 30, 2021