Carrying credit card debt is a reality for many Americans. If you find yourself going further and further into credit card debt each month, or struggling to make any sort of dent in the amount of debt you owe, it might be time to develop new strategies for paying off credit card debt. Below are five ways you can pay off your credit card debt faster.
1. Stop using Your Cards
The simplest step you can take is to stop using your credit cards – for anything. Keep your credit cards open, but promise yourself that you won’t use them.
The easiest way to stay out of debt is to not get into it in the first place. The same goes for getting out of debt – if you keep your debt to a minimum and don’t add to it, it will be easier to pay off what you already owe.
Not only will paying cash prevent you from adding to your existing debt, but it might also help you become more conscious about what you are spending your money on. There is something about paying for things with cash that makes you think twice about whether you really need the item.
2. Identify the Card with the Highest Interest Rate and Pay that Down First
If you have more than one credit card with an outstanding balance, be strategic about your monthly payments. There are a few steps to what is commonly referred to as the “debt avalanche method” of paying down debt.
First, you make the minimum monthly payment on all of your credit cards, no matter what. Second, you identify which credit card has the highest monthly interest (the annual percentage rate or “APR”) and you pay as much as you possibly can towards paying off that credit card. For example, if one card has a 10% APR, another a 12% APR, and a third a 14% APR, you would make the minimum payment on each of these cards and then put as much money as you can towards paying off the card with the 14% APR.
Once the card with the highest interest rate is totally paid off (in this case the one with the 14% APR), move on to the card with the next highest interest rate and work to pay that one off until all of your credit card debt has been paid off. In the long run, this strategy will help you to pay your credit card debt faster, with the added bonus of paying the least amount of interest since you’re paying your highest APR cards off first.
3. Negotiate Lower Interest Rates on Your Credit Cards
The next strategy only takes a few minutes and could end up saving you thousands of dollars, as well as help you pay off your credit card debt faster. For every credit card you have, call your credit card company and negotiate the APR. People are surprised that this is possible but credit card companies are often willing to give you a lower interest rate, especially if you have a history of making your monthly payments and otherwise show that you are a trusted borrower.
4. Consolidate Your Credit Card Debts
A fourth option is credit card consolidation. If you are carrying debt on a couple of credit cards, you might be able to transfer the balances on each of those cards to a new card offering a lower interest rate, saving you money in the long run on interest payments. Credit card companies often offer introductory rates of 0% APR when you transfer your outstanding balance to the new card.
Just be aware of the APR, as the 0% APR typically only lasts a few months and might come with a transfer fee. A debt relief company can help you sort out these offers and suggest the best course of action for you if credit card consolidation is something you are considering.
5. Seek a Debt Consolidation Loan
A fifth option is a debt consolidation loan. With debt consolidation loans, a person takes out a personal loan and uses the amount of that loan to pay off their existing debt. The reason this helps pay off your credit card debt faster is that debt consolidation loans typically have much lower interest rates (as low as 6% in some cases) than credit cards (which can be as high as 20% or more).
By paying your credit cards off and having just one monthly payment on the debt consolidation loan you will be able to pay off your debt much faster by freeing up the money spent on interest payments to put toward the principal. A debt relief company can work with you to show you the best debt relief program and assist you in obtaining one of these loans.