Because credit card debts are flexible, and if one is not careful with spending, it can end up in a cycle of debts. They are expensive to maintain due to the high rates. With some good amount of organizational skill, it is possible to pay off credit card balances much faster. In this blog, let us discuss several strategies regarding the most effective ways to pay off credit card debt more quickly. To be able to make any positive progress towards the achievement of the freedom from high interest debts, follow the following strategies.
What does it mean to pay off a credit card balance?
Credit card debt repayments are higher than the minimum amount required to be paid as provided on the monthly credit card statements. It enables one to discharge balances in a faster manner than the nominated periods. It hence minimizes the overall accrued interest charges. This is done to pay off the debt down to zero and make additional periods of extra payments. This also results in no more prior balance and interest charges on each statement. So, tipping over the minimums is crucial for credit card debt relief.
How can one figure out which debts should be paid first?
While trying to achieve the credit card debt free status, sequence is important. Direct your efforts to pay off the highest interest rate and make the minimum payment on all the other accounts. This is commonly known as the ‘debt avalanche’ strategy. For this, one has to consider rates of interest and loan that you possess or are willing to take. List all debts starting with those that have higher interest rates down to those that have lower interest rates. Put every penny towards the first debt on your list, and only pay minimum amounts on the other debts. When all the high cost accounts are paid off in full, proceed to the next cheapest account. This is done in order to minimize the amount of interest to be paid. Practice this technique until you have cleared all the balances on your cards. The key rationale in this is to mathematically compute the least total interest paid.
To increase cash flow, what other measures can one take?
The ability to increase disposable income to be directed to both servicing of the debt and important needs should also be given adequate attention. Thus, the more cash you can allocate towards balances on a monthly basis, the better the state of affairs will be.
Here are some steps to boost your monthly cash flow:
Reflect on daily, weekly, or monthly expenses to make potential reductions – change phone tariff, cancel subscriptions, etc.
It’s important to look for another job which offers hourly wages, freelancing or any other additional income.
Pay off other debts on cards by having the credit card issuer negotiate with companies for lower interest rates or payment installments for medical bills, student loans, and other costs.
Junk items in the house, mobile phones, computers, clothes etc. helps in getting quick money online.
Any additional $100-$200 in monthly income can go a long way in extra. Strive to come up with unique ways of managing your expenditure and boosting your income levels.
Due to the high average credit card interest rates compared to other forms of consumer debt, reducing this cost translates to paying off balances faster.
Here are 3 smart ways to reduce the interest fees adding to your debt each month:
Make a request to your credit card company to lower the interest rate. Even the mere threat of closing the account may help to slash rates.
Pay off high interest debts with a 0% Introductory APR. Also consider transferring fees especially when you are transferring from one bank to another.
Pay-off balances into a fixed-rate personal loan. Credit unions and banks allow borrowers access to installment loans with lower interest rates than a revolving credit card.
Using any of the tactics minimizes the monthly interest charges thus allowing more money to go to the principal sum. Make sure to weigh all of the details and costs to select the most suitable approach for the most effective debt payoff.
Paying with savings instead of credit cards: is it a good idea?
This is a popular question from people seeking to pay off credit card balance within a shorter period than is commonly recommended. On the one hand, the application of your savings gives an immediate drive toward balances. This, however, makes you a candidate vulnerable in scenarios such as emergencies or any other form of expenses. It is also very important not to wipe out one’s savings entirely to pay a debt as most financial gurus recommend. Therefore, assess your emergency fund. If you hold more than one as a precautionary balance, then consider investing part of this into cards. This, therefore, offers a fair compromise between debt servicing and the need to keep reserve for rainy days.
Conclusion
It is possible to pay off a credit card balance faster when you are able to plan and determine. Always direct more available money excess to balances and always do it effectively based on your circumstances. If you keep your mind set on the goal of eliminating high interest rate credit card debt then you will see how far you have come.
FAQs
Why should the clients hire your company?
As for the clients, we do not deceive them as to the amount of debt they will be allowed to pay back and demand enormous initial payments. We are actually a legal non-profit credit counseling agency to offer you help and support.
What effects arise if the person only pays the minimum due?
Even though keeping up the accounts active and ensuring that at least the marked down minimum payment is made will ensure that accounts are active and acceptable. It also makes the interest rates very high to a level that escalates the balances upon various time durations. This is why buying credit card balances more aggressively is so effective it makes real sense.
How does the use of minimum payment on credit cards affect credit status?
They lead to accumulating much larger amounts in interest charges in the long run and may be up to 20 years to clear even minor balances. Hence, minimum payments should not be relied on as the main repayment method because it only clears the interest.
