According to CNBC, eight out of every ten American’s is in debt of some sort. In fact, the median amount of debt in the average white American household is a little over $41,000.
With that being said, it’s no wonder that paying off credit card debt is such a big topic.
If you’ve found yourself struggling to pay off your credit card balances, keep reading. Here are some useful tips that will put you on the path to financial freedom.
Assess Your Finances
The first step to paying off your credit card debt is to take the time to assess the state of your finances as a whole.
Sit down and take inventory of all of your expenses, the total amount that you’re in debt, and any other places your money is going. Once you’ve done that, compare those numbers to your typical income and try to estimate how much you can begin to put toward paying down your balances.
One of the best ways to do this is by creating a spreadsheet where the most important expenses, like rent, car payments, and credit cards, are listed first followed by other more luxury-type expenses. This will encourage you to take paying off your credit card debt as seriously as paying other necessity type expenses.
Consider Transferring Your Balance
Before you make the decision to transfer some or all of your balance in a balance transfer, you should weigh the pros and cons of doing so.
In the case that you’re paying off a card with a high-interest rate and you’re only making the minimum payments, transferring your balance to a card with an intro deal with 0% APR for an extended period of time is a good idea.
On the flipside of that, if you’re on a card with a relatively low-interest rate and you’re able to make more than your minimum payments then you’re probably better off not transferring your balance.
Another option aside from doing a balance transfer that is available to those carrying a lot of credit card debt is to attempt to consolidate your debt with a personal loan with a lower interest rate. This will give you the ability to help your credit score and pay down your debt without paying out too much in interest costs.
Make a Budget and Stick To It
Once you assess your finances as a whole and how much you’re in debt, use that assessment to make a budget. To pay off your credit card debt as quickly as possible try to identify parts of your expenses that you can cut out and instead re-dedicate that money to paying down your balances.
Budgeting isn’t always terribly fun and can be frustrating at times, but your credit score and peace of mind will thank you. So, set your budget and don’t stray from it.
Control your spending by challenging yourself to stash away a certain amount of cash on a daily or weekly basis. If you incrementally put away small amounts of cash on a regular basis and hide it where it’s out of sight and out of mind you can help yourself save money and repurpose it for paying down credit card debt.
Another good strategy for managing your budget is using cash to make your payments for day-to-day purchases. At the beginning of every week get out as much cash as your budget has set for that week and only allow yourself to spend cash.
By having to physically pay for something with paper money you begin to be more conscious of how much you’re spending. It’s easy to lose track of how much you’re actually spending when you swipe a card. However, with cash, you have a physical representation in your hands that dwindles as you spend and keeps you more aware.
Set Up Automated Payments
Automated payments serve a couple of different purposes.
The first of these purposes is making sure that your payments are on time 100% of the time. Since your payment history makes up roughly 35% of your overall credit score, this is incredibly important. Even if you’re only late by a day or two, it can still drag your credit score down.
The second purpose of automated payments is to make sure that you’re paying at least the minimum payment every month. Ideally, you’ll be paying more than this, but automated payments hold you accountable for making the minimum contribution to paying down your debts.
Make Multiple Minimum Payments
Even if you have automated payments set up, you don’t necessarily only have to make one payment every month. Allow your minimum payments to take place automatically and then, if possible, pay a little more.
If you’re intimidated by paying large sums of money all at once toward your credit card debt, start by making small weekly payments that make it feel easier. Not only will this keep you motivated, but it will also enable you to pay off your debt faster.
When you pay more than the minimum requirement you cut down on the amount you pay overall because you cut down the amount that you pay in interest.
Stop Using Your Credit Card
This may seem like a no-brainer, but seriously! If you’re in debt with credit cards you should cease using them immediately.
Use the cash method outlined above or stick to a debit card for all of your purchases and bill payments.
Even if you’re using the credit cards and telling yourself you’ll pay it off immediately, it’s better to hide them away and just not touch them.
If You’re In Debt, Take Advantage of These Tips
You don’t have to live your life struggling to pay off credit debt if you implement the right strategies.
Though you may have to make some sacrifices now to pay off your credit card debt, you’ll save yourself more pain in the long run and avoid the possibility of bankruptcy and poor credit scores.
If you need more guidance and don’t know where to begin, contact us at Stone Bankruptcy Law Firm and we’d be happy to help.