If you have or have ever owned a credit card, the chances are you know a thing or two about credit card debt. Getting into credit card debt is easily done, especially if you ever need to use it to cover an unexpected emergency such as paying for unforeseen medical bills or in order to prevent your house from going into foreclosure.
Credit Card Debt Can Be a Killer
Paying off credit card debt isn’t so easy, and unless you’re careful in managing it, credit card debt can haunt you for years once you’ve racked up a considerable amount of it. The only main way to avoid getting out of credit card debt without actually paying it off is through declaring bankruptcy, which you likely don’t want to do since that would make it virtually impossible for you to take out a mortgage, get a car loan, or do anything else that requires a check on your credit score.
If you face considerable credit card debt, it’s essential that you begin to pay if off straight away, as this will help you avoid getting into even more debt from compounding interest, as well as helping you to improve your credit score by decreasing your debt to income ratio.
Use these ten essential tips on how to pay off credit card debt to help you get out of the red as soon as possible:
1. Pay Off Your Debt Gradually
Unless you owe the IRS money (and in this case it’s best to pay your debts off as soon as you can) try to pay off your debt gradually rather than paying it off all at once. Unless you’re tremendously rich, it’s likely that you need money to pay for other things, such as your mortgage or rent, bills, car insurance and other general living costs. Although it is essential that you do pay off your debt, consider starting slowly to get into the habit of sensibly paying off your credit card without leaving yourself in a financial bind.
2. Know Exactly What You Owe
How many credit cards do you have? Add up all that you owe across all of your credit cards, including store credit cards as well. Once you know exactly what you owe, create a plan of how you’ll begin to start paying it off. Once you know exactly what you owe, you can check your budget and generate a solid plan to wipe out all of your credit card debt. Even though it adds what you think might be an unnecessary step in the process, it will be worth it since it will be easier to follow through with once you’ve got a real plan in writing.
3. Consider Transferring Your Balance
If you do indeed have credit card debt spread across various credit cards, you may want to consider transferring your balance onto just one card. Shop around for the card that offers you the very lowest possible interest rate, transfer all your debt to that card, and you’ll have reduced the total debt you owe by decreasing your interest rate.
4. Try to Renegotiate Your Interest Rate
Even if you decide not to transfer your balance you should at least try to renegotiate your interest rate with your credit card company. This can be done by simply getting in touch with the credit card company and explaining your situation. Explain that you are starting to pay off your credit card and that you want to see if a lower interest rate can be awarded as a result. There’s no guarantee that your credit card company (or companies) will agree to lowering your interest rate, but it’s certainly at least worth a try.
5. Always Pay More than the Minimum
Always pay more than the minimum amount on your credit card each month, as otherwise interest will inevitably skyrocket. Paying the minimum is of course better than nothing, but it won’t do much to help improve your credit score or ultimately get you out of significant credit card debt – so always pay more than the minimum amount each month.
6. Avoid Tapping into Your Retirement Savings
Avoid tapping into your retirement savings in order to pay off your credit card. No matter how astronomical your credit card debt is, it is highly unlikely that it is bad enough that you should withdraw from your retirement savings. Not only will taking money out of your retirement funds be met by various penalties and fines, but it will also without a doubt mean that you’ll have to spend more time in the workforce. Instead of pulling from retirement, you’d do better to start cutting costs.
7. Consider a Secured Personal Loan
If you’ve maxed out your credit card and paying off credit card debt becomes a number one priority for you, then you may want consider a secured personal loan so that you can pay off either your entire credit card debt or at least a large chunk of it. A secured personal loan allows you to use something you own (such as your car or your house) as collateral to borrow money. These loans can often be processed much more quickly than traditional bank loans as they usually have fewer application requirements. Although getting into new debt is hardly the ideal solution, in some extreme circumstances it may be the best solution – especially if you can get a loan at a lower interest rate than you’re currently facing.
8. Start a Savings Account
Ultimately you got into debt by living beyond your means, so to prevent this from happening again, you should strongly consider creating a savings account. Even if you can only put a couple of dollars into your savings account each month, it’s worth it as it will all eventually add up, and you’ll also start to see some interest building as well. Once you have a considerable amount of money in your savings, you may never find yourself in such debt again.
9. Adjust Your Lifestyle
In addition to creating a savings account, it is also very important that you adjust your lifestyle as this can significantly help reduce your chances of getting into major debt again. Make sure to cut back spending wherever you can. Perhaps this will mean choosing a cheaper apartment to rent, opting for a more reasonably priced insurance plan or being more economically mindful when you visit the grocery store. Look at where you overspend on a month to month basis, and cut back on whatever you can get away with.
10. Don’t Acquire New Debt
Unless you absolutely have to, try not to acquire any new debt. Stop using your credit card, don’t purchase anything huge that you don’t absolutely need, and don’t take any big financial risks. Make a concerted effort to never use your credit card for future purchases, but to instead live within your means by using your debit card or by paying with cash. This significantly reduces your chances of getting into overwhelming credit card debt, and is perhaps the most important step that you can possibly take toward becoming debt free.
Car Capital Financial
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