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Paying off a credit card can be a challenging task; however, it can be relatively easily managed with some careful planning and discipline.
Here are some practical tips from the experts on how you can pay off your credit card faster.
Bested by the Budget? One of the first things that a person facing huge debt is to evaluate and sort out their budget. What I did to pay off my debt was to download a budget app on my phone - and then noted every expense and purchase as well as savings I did. This helped me keep track of my spending and allowed me to put an end to impulse buying, eventually leading to enough money to pay off my debt. I would also suggest people either track their budget manually on paper or diary or use countless digital means available!
Is It Too Late Now To Say ‘SAVE’? When facing a debt, one must properly save! The best way to do this is to open a separate account that is reserved- just for saving purposes. I usually transfer 20 percent of my monthly salary into another account as soon as I receive it - and I do not have a checkbook or debit card for it. This helps ensure that a stream of my income is properly saved for the purpose of repaying credit card debts, and any unnecessary transactions are avoided! I would suggest people who have no self-control when it comes to spending their salaries use this trick.
Every day I'm Hustling!
The last tip I would like to give is to start a side job. This will help add extra income to your budget and give you more room for spending. Or the extra income earned can be transferred to your savings account - which can be used to repay the debt quickly!
Aviad Faruzo, Financial Consultant Faruzo
Sort the interest rates on your credit cards from highest to lowest, then start with the one with the highest rate. You can boost your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards by paying off the balance with the highest interest first.
Sep Niakan, Managing Broker Condoblackbook
You must pay more than the minimum sum on your credit card accounts each month to make a difference in your debt. Limiting debt payments to minimal monthly installments is a costly method of debt management that is not suggested as a long-term solution. To save money and offer your budget a little breathing room, I recommend paying off balances as quickly as possible.
Jeroen van Gils, CEO at EcomContent
You may qualify for a 0% APR balance transfer offer with a balance transfer credit card if you have good to exceptional credit despite your debt, which is achievable if you've been paying your minimum monthly payments on time and maintained your credit-utilization ratio low.
This initial offer of no interest might last anywhere from 12 to 21 months, and it will let you move your higher-interest balances to the new card. For the duration of the 0% period, you'll save money on interest, making it easier and faster to get out of high-interest debt.
Alex Uriarte, a personal injury attorney at 1-800-Injured
The avalanche debt repayment method means that you’re making minimum payments towards all debts you have except the one with the highest interest rates. The point is to pay off the largest debt first, as in the end, you’ll pay much less in interest. Once you pay once out, you move onto the second largest one, and so on.
If you’re struggling financially and you need to get a hold of your finances, you should be looking at deals more than usual. Stores frequently offer deals and discounts and give out coupons you can use.
Also, you can take dumpster diving into consideration. Usually, stores throw out perfectly good food that is expired - but still perfectly safe for consumption.
Stefan Ateljevic, Founder of PlayToday
Budgeting shows you your income minus your expenditures. Expenses should be kept to a minimum. Housing, utilities, and food are more difficult to cut than entertainment, dining out, or clothes.
Pay off debts in order of interest rate, beginning with the highest. Compared to the snowball approach, this is the most cost-effective way to pay off debt, especially during this pandemic.
For low-interest loans, you may wish to cease paying extra after all previous debts over that level have been paid. Higher rate debts should be paid off first, while lower interest loans may be extended out to give you the leverage you need to exit debt as soon as possible.
Dom Lucre, Founder of Credit Cadabra
Micropayments are smaller payments you make to the credit card company throughout the month. Most major issuers allow you to make payments as often as you’d like.
Micropayments can help you pay off your debt faster. From a financial standpoint, one of the worst things you can do is to carry a credit card balance from one month to the next. The exorbitant interest rates that most companies charge will make this an extremely costly practice. You need to pay off that balance as soon as possible. Directing any extra money you have during the month toward paying down that balance is very beneficial.
Say a couple was thinking about going out to eat pizza and take in a movie one night. But they may not feel comfortable doing this during this recent spike in Covid cases. Instead of spending that $50, what if they ate at home and rented a movie? They might save $30. If they took that money and immediately made an online $30 payment to their credit card balance, their debt would forever be lowered by $30. If they made a habit of doing this every time they made a conscious effort to save money, they’d be surprised at the dent they could make in their credit card debt.
Many credit card companies calculate your interest based on your average daily balance throughout the month. If you are making smaller payments during the month, you will slightly lower your average balance. The higher the interest rate on your card, the more you will save.
By making smaller payments throughout the month, you will be avoiding late payments and using slightly less of your available credit, both of which are important factors in increasing your credit score.
Instead of looking at an overwhelming financial mountain, you may feel a small victory in seeing that debt amount start to decrease. That may lead you to make even smaller payments.
Bill Hardekopf is the Senior Industry Analyst on credit cards at CardRates.com.
Paying off debt fast is all about increasing your income. It’s possible to save money by decreasing expenses, but the ultimate winning strategy is starting a side hustle, picking up extra hours at work, asking for a raise at work, or starting a business.
Income is the way to solve your financial issues and can accelerate your debt-free journey.
In 2021, there are many work-from-home jobs available for people to do that pay pretty well.
This is how my wife and I paid off debt so fast. We started an online side hustle that brings in extra income, and we started working more hours at work until we were debt-free.
The main thing to remember is that it’s a temporary sacrifice for long-term gain. You don’t have to work extra hours forever, but it will help you pay off debt faster.Neiko Johnson, Co-Founder, and Editor of personal finance blog; Secret to Finance