5 Tips to Paying Down Your Credit Card Debt
5 Ask for a Rate Reduction
If your finances are in trouble because of your credit card debt, call the credit card companies and explain your situation. Some companies will work with you to reduce your interest rates or monthly payments. Why be so nice? Credit card companies would rather have you make smaller, more affordable payments than no payments at all.
4 Increase Your Minimum Payments
When you look at a credit card statement, you’ll notice that the company makes you pay money toward a “principal” balance and interest. The principal is the amount of money that the credit card company lent you. The interest charges are the credit card company’s fees for lending you money. Any other fees that you have to pay are the company’s way of sticking it to you. When you have a significant amount of debt, the payments that you make may only go toward paying off the interest that you owe. The longer you’re in debt, the more interest you pay. By paying more than the required minimum payment, even just 10 percent more, you’ll get out of debt faster because the credit card company will apply the extra money toward your principal balance.
3 Pay the Smallest Debts First
It’s common for people to think that they should pay off the largest credit card debts first. The opposite, however, is usually a better way to go. Pay off the smallest debts first and get them out of the way. Then use the freed-up cash to pay off the larger debts faster.
2 Avoid Frivolous Spending
Only spend the money that you have. To figure out how much money you can spend on certain items, make a budget that includes your housing, food and utility costs; credit card payments; and other cost-of-living expenses. The money that you have left can be your “fun” money. If you’re smart, though, you’ll use it to pay off your debts faster.
1 Stop Using Your Credit Cards
To get out of credit card debt, stop using your credit cards. Otherwise, you’ll only dig yourself deeper into debt. Gather all of your credit cards and set aside the one that has the lowest interest rate. Then shred the remaining cards. Put the card that you saved in a secure location, such as a locked desk drawer or safe. Your wallet does not count as a safe place. Use this one card only in an emergency, such as when you’ve lost your wallet and are waiting for new debit cards to arrive in the mail.