Do you know the percentage of people who have credit card debt? A study shows that up to 30% have $5000 and less in debt. 21% have more than that amount. We are talking about over 40 million people who find themselves in such situations.
You may very well be one of those contributing to the shocking statistics. Debt can be devastating on a personal level. And, it could impact your credit score leading to so many repercussions.
It can be difficult to land financing with poor credit scores. Some jobs may be inaccessible, and even getting an apartment can be impossible. The good news is there are ways to pay off credit card debt. We will show you how below.
1. Keep a Close Watch on Your Finances
It is possible to land into debt because of your spending. The first step is to take an honest look at how to manage your finances. Is your expenditure higher than what you’re bringing in?
There are ways to manage to spend when paying your debt. You can, for instance, cut back on your expenditure. Forgo eating out in expensive restaurants. How about cooking at home a little more.
Signing up to platforms like Chunk Finance can give you a little more control over your finances. You get access to financial information. The platform allows you to track your credit utilization, ensuring a strong credit score.
You get notifications on things like overdraft charges, spending thresholds, and balance updates. The reports come with charts and other visualizations. It helps you get a bigger picture of your expenditure.
The experts will also identify and recommend interest rate minimization methods. And, that’s not all. The analytics give insights into expenses and help you build healthier financial habits.
2. Get Rid of Expensive Balances First
Sit down with a notebook and pen, and write down all your debts. Arrange them from highest to lowest interest rates.
Now, put aside a minimum amount on each. Add any extra cash you have to the high-interest debts. What you will be doing is the avalanche method of debt repayment.
3. Try the Snowball Method of Debt Repayment
The snowball method of debt repayment is the reverse of the avalanche method. It requires you to pay the lowest balances first. But, it does not mean that you forget to make minimum payments on the other debts.
The advantage of this method is that you tick off your debts as you clear them. It can be motivating to see the balances reduced. As you clear the debts, allocate the money you would otherwise pay to the minimum balance of the larger debts.
4. Utilize Balance Transfer Credit Cards
Some lenders have the option of balance transfer credit cards. They give a window of up to 20 months, with no interest. It provides an effective way to manage high-interest credit cards.
Do read balance credit card terms and conditions carefully. After the zero interest duration, they will apply interest rates. It helps to know what this is to avoid any nasty surprises going forward. A high-interest rate could land you back in credit card debt.
Take note of the transfer fee and the credit limit on the card. There is also a qualification criterion, which is often good to excellent credit scores.
5. Pay Off Student Loans
If you are a student, take time in looking for the best credit card for college students. There are tons of online resources that can give you the information you need. Just make sure you can meet the payment requirements to avoid landing in debt.
So what happens if you have student loans? Well, paying off student loans has the advantage of giving you flexibility and more freedom with your finances. Try and allocate more than the minimum monthly amount towards clearing such.
Do note, some student loans have higher interest rates. Combine this with credit card rates, and it can be pretty overwhelming. In this case, we recommend the avalanche method of debt repayment.
Take care of the high-interest rates on student loans, while making minimum payments on credit card debts.
6. Debt Consolidation
Let’s say you have several credit cards. You can clear such debts by consolidating them into a personal loan. A good credit score can qualify you for amounts large enough to cover the entire balance.
Shop around for loans with friendly interest rates. It should ideally be lower than what you are paying on the credit cards.
7. Borrow From Family and Friends
Another option that is open to you is to borrow money from family or friends. The bad news is that you will still be in debt. But, depending on the relationship, they may not charge interest. You get access to money that will help you clear some of the balances.
A word of caution though. Money and friendships do not mix. It is of utmost importance that you pay what you owe at the agreed-upon time. There could be irreparable damage to your relationships if you do not keep your word.
As attractive as this debt payment avenue looks, only consider it as a last option.
Financial prudence can keep you out of credit card debt. But, the reality is that life does not always go as we plan for it to. You may find yourself in debt and need a way out.
We have shared some ideas about how to get out of credit card debt.
Some spending habits can land you in hot water. If the expenditure is higher than income, there is a problem. Keep an eye on your finances by signing up to platforms like Chuckfinance.
Use the avalanche or snowball methods to clear high or low-interest debts.
Manage to spend when paying debt by cutting out unnecessary expenditures. A good idea is to come up with a budget and stick to it.
Consolidate credit card balances by taking a personal loan, and paying them off at once. You can also borrow from your loved ones, including family and friends. The only caveat is to make sure you pay them back at the agreed-upon time.
Good luck with clearing your credit card debts.