How Do I Pay Off Debt With Balance Transfers
When you have credit card debt, one option is to transfer your credit card balance to a different card.
If you have an account with a high interest rate, for example, you can transfer its balance to a card with a lower interest rate and spend less money on interest over time. This is like paying off one credit card using another card.
- Step 1: Identify the credit cards where youre paying interest on a balance.
- Step 2: Decide how much money you can or want to transfer.
- Step 3: Apply for a new balance transfer credit card, offering 0% APR on balance transfers for a set amount of time .
- Step 4: Transfer the balance, or balances, from the older cards to the new card.
- Step 5: Pay off your balance on the new card try to pay it all off before the 0% period ends.
After performing a balance transfer youll open up the credit lines of those cards but dont use your newly available credit to rack up more debt.
A lower-rate balance transfer card can fit well with the avalanche method. Since you can use a balance transfer to strategically reduce the interest rate on your highest-interest debt, it can buy you time to focus on the next-highest interest account. This can reduce the total interest you pay.
Many balance transfer credit cards even offer a 0% APR for an introductory period . A 0% APR offer allows you a chance to pay off your credit card balance without incurring extra interest charges.
Q& A Video: What Is a Balance Transfer Offer? Is it a Good Idea?
Tips For Paying Off Credit Card Debt
Ready to learn the best ways to pay off your ? Its easy to feel stuck when youre struggling to make minimum payments and frustrated with how far your financial goals seem to be. However, no matter how bad you think your situation is, theres a way out that will work for you. Here are 10 practical ways you can quickly tackle your maxed out cards and take your first real steps towards getting out of debt.
Is It Better To Put Money In Savings Or Pay Off Debt
Paying off debt has its advantagesespecially if you’re incurring a high-interest rate on it. With a lot of consumer debt , as much as half of the monthly minimum payments go towards interest. Those interest payments are just money thrown away. A lot of debt will also ding your credit score, making it hard to get financing at good rates if you want to buy a home or other big-ticket item. And finally, paying off debt will free up funds for other thingslike savings or investments.
But there are pluses to saving too. You’re putting your money to work for you, generating returns and earning interest. And, thanks to the miracle of compounding, your principal can multiply quite a lot over the years. Since time is a factor, the earlier you start, the better. Of course, much depends on what prevailing interest rates are, and how aggressively you want to invest your funds.
As a general rule, if you can earn more interest on your money by investing it than your debts are costing you, it makes sense to invest. But it doesn’t have to be an either/or propositionyou can try to do a little of both, simultaneously.
Read Also: Bestbuy Credit Card Online
Consider A Balance Transfer Credit Card
If you have good to excellent credit despite your debt which is possible if youve been making your minimum monthly payments on time and kept your low you may qualify for a 0 percent APR balance transfer offer with a balance transfer credit card. This zero-interest introductory offer could last anywhere from 12 to 21 months and will let you transfer your higher-interest balances to the new card. Youll save on interest for the duration of the 0 percent period, making it easier and faster to get out of high-interest debt.
You should always pay attention to the interest rate after the promotional period is over, says Justin Zeidman, manager of credit card products at Navy Federal Credit Union. Consider how long it will take to pay off your credit card debt in comparison to the promotional period so you dont get stuck with a higher interest rate after the 0 percent interest period is over.
Who this strategy is good for: Those good at keeping track of credit card payments.
Budget Wisely And Track Your Spending
If you dont already have a set budget that you follow, now might be the time to start. Make sure your budget includes any non-negotiables, such as rent, utilities, food, and loans first, as these categories take priority. Then you can determine how much money you can realistically spend on your credit card each month with respect to your discretionary categories.
When your budget is in place, use it to track your spending over the course of the month. You can either do this manually by taking stock of your spending every few days or perhaps once a week or by using a budgeting app.
Reevaluate the budget youve created for yourself in two months to make sure you accounted for all of your spending accurately. Then, going forward, make a habit of checking in with your accounts regularly.
Also Check: Apply Best Buy Visa Credit Card
Cut Back On Your Credit Cards
If you have multiple credit cards, plan to reduce the number you have.
Try setting yourself a goal to pay off one card at a time. Start with either of these:
- Smallest debtPaying off the card with the smallest debt first helps motivate you to keep going. Once you’ve paid that off, move onto the next smallest debt.
- Highest interest rateIf one of your cards has a much higher interest rate, consider paying off that one first. Then pay off your other cards one by one.
Whichever option you choose:
- Keep making the minimum payments on all your cards.
- Use only one of your cards, and try to keep it just for emergencies.
- Cancel each credit card once you’ve paid it off.
Clever Ways To Pay Off Your Credit Card Faster
Do you feel stuck in a never-ending cycle of credit card debt? If every month you find yourself paying just the minimum balance due or carrying a high balance on your credit cards, you have whats known as revolving debt. Unfortunately, this kind of debt has a negative effect on your . However, it is possible to pay off credit card debt and end this cycle, once and for all.
Heres a list of six clever ways to pay off your credit card faster:
You May Like: Best Buy Credit Card Options
How Payments Are Applied To Your Balance
If you dont pay your entire credit card balance by the due date, youll pay interest.
Different interest rates may apply to different types of credit card transactions. For example, cash advances often have a higher interest rate than purchases. This means different interest rates will apply to your balance depending on how you use your credit card.
Typically, your minimum payment will apply it to the portion of your balance with the lowest interest rate. Any amount you pay over the minimum payment applies in one the following two ways:
- to the portion of the balance with the highest interest rate
- proportionally to the entire balance
A credit card issuer that is a federally regulated financial institution can decide how it will apply your minimum payment to your balance.
Check your credit card agreement or ask your credit card issuer how it applies a payment to your balance.
Take Out A Personal Loan
If you dont have excellent credit, applying for a personal loan and paying off your credit card debt in full might be your best option. You can search for a lender online or check with a local bank or credit union to see if they offer personal loans . Youll still be paying interest, but likely at a lower rate, since APRs for personal loans are often several percentage points lower than credit card APRs. Youll also only have to make one debt payment every month instead of having multiple credit card accounts and due dates to keep track of.
Recommended Reading: Cabelas Financing
Contact A Credit Counseling Service For Professional Help
If youve already tried the tactics on this list and are still struggling to get your credit card debt under control, it might be time to call in the pros. Nonprofit credit counseling services will look at your credit card debts in the context of your other financial obligations, like a home equity loan or line of credit, car payment or student loans, and work with you to create a repayment plan. Some even negotiate with credit card companies to get you a lower interest rate and offer financial literacy education that can keep you from falling back into the debt trap in the future.
If your financial situation is especially dire, and youre contemplating bankruptcy, its already a requirement to undergo credit counseling before pulling the trigger. Taking this step on your own could lead to the realization that you can conquer your debt with a payoff plan, and not bankruptcy, after all.
Find The Best Products To Help You Pay Off Debt
Some of the most effective strategies for getting your head above water financially often involve a balance transfer credit card or personal loan.
Once youve decided the best route for your situation and budget, the next step is choosing the right card or loan from dozens of available options. Credible is here to help you make the right decision by allowing you to compare credit cards and personal loan options, so you can find the right fit for your needs.
Ready to find your personal loan?Credible makes it easy to find the right loan for you.
- Free to use, no hidden fees
- One simple form, easy to fill out and your info is protected
- More options, pick the loan option that best fits your personal needs
- Here for you. Our team is here to help you reach your financial goals
Don’t Miss: How To Check Cabela\’s Credit Card Balance
Use Your Assets To Pay Off Cards
If you have assets such as savings and non-retirement investments that you could use to pay down high-interest credit cards, it may make sense. Just remember that you still need a healthy cash reserve, such as six months worth of living expenses.
If you dont have any or enough emergency money saved, dont dip into your savings to pay off credit card debt. Also, consider what you could sell such as unused sporting goods, jewelry, or a vehicle to raise cash and increase your financial cushion.
Use The Snowball Method
In order to quickly settle your balances, its important to determine which debts to pay off first. When it comes to credit card debt, you can choose to pay off small balances first. A great strategy to settle credit card balances without the risk of accumulating more debt is through the snowball method.
Using the debt snowball approach, you can settle all your obligations regardless of interest rates. With this approach, you can bring down your credit use on individual cards faster and lower the number of accounts that have outstanding balances. When you finish settling the smallest balance, you start settling the next account.
Each balance you settle gives you more cash to assist in settling the following accounts faster. Once your payments pick up momentum, it is easier and more motivating to keep settling your remaining debts. Besides, the debt snowball approach can positively affect your credit scores, particularly if you eliminate credit card debts first.
Also Check: How To Pay Best Buy Credit Card On App
Shorten The Length Of Your Loan
Refinancing your debt to a shorter term may help you pay it off faster and save on the total cost of borrowing. With the same interest rate and shorter term, you wont pay as much total interest over the life of the loan. Remember, shortening the term of your loan could increase your monthly payments.
Reduce Spending By Tightening Your Budget
Nobody likes to hear this, but one of the easiest ways to quickly pay off debt is to throw more money at it every month.This means finding new ways to save, like canceling your cable TV or reducing the number of nights you order takeout. Anytime you can make more than the minimum payment on your credit card bills, youre one step closer to being debt-free.
Read Also: Best Buy Card Apply
How Do I Pay Off Debt With Debt Settlement
Debt settlement is another option you can consider when youre ready to eliminate your credit card debt. This strategy usually works best for people who are already past-due on their credit card payments and can afford to make large, one-time settlement payments to their creditors.
You can settle debts on your own or you can hire a professional debt settlement company to handle the process for you. If you choose to hire an outside party, you should do extensive research to avoid scammers and exorbitant fees. Be aware that hiring a company to do this is not necessary, and could end up costing you a lot more money. Learn what to watch out for at the FTC Consumer Information website.
- Step 1: Examine your debts, and determine your ability to repay them over time.
- Step 2: If you think your debts are insurmountable, and youve decided bankruptcy isnt the right response, you can either attempt debt settlement yourself or hire a company. The worse your situation the more leverage you might have, because your creditors will see that theyre less likely to be paid in full.
If you go the DIY route:
Or, if you prefer to work with a debt settlement company:
This option usually only becomes available after its become clear that youve been struggling to pay your bills, like if youve started to accrue late payments or havent been paying at all.
Assess Your Current Financial Picture
Nothing inspires panic like financial problems, but you owe it to yourself to take a deep breath. This is one large problem that you can approach in smaller increments.
The first step is a complete and honest assessment of your financial picture. Write down all sources of income so you have an idea of what is coming in every month. Next, map out a realistic monthly budget. This should include the obvious expenses such as rent, phone, and groceries, but be ruthless with yourself. Do you also buy expensive coffees during the week? Put it in the budget. How about restaurant meals, Uber rides, or Amazon Prime? All these need to be in your budget.
Next, identify the areas where you can save. Even one less fancy cocktail per week will make a difference, and these small changes really add up.
I know people wont want to hear this, Choi says. But cutting out the fun stuff such as eating out or travelling is a must since you can use that money to pay down your credit card debt.
One word of warning, though: when making your budget cuts, make sure theyre reasonable and not too restrictive. Youre far more likely to overspend if youve not left yourself a little wiggle room. All your work building a workable budget will be useless if you dont stick to it.
You May Like: Cabelas Reward Points
Pay As Much As You Can Each Month
If you can make higher repayments each month, you will pay off the debt faster and save money.
Work out the fastest way to pay off your credit card.
If you only pay the minimum, you’ll pay a lot of interest and it will take years to pay off your debt in full.
If you’re finding it hard to pay the minimum amount, contact your bank or credit provider straight away or talk to a free financial counsellor. Taking action early stops a small money problem from getting bigger.
What Are Other Credit Card Repayment Methodsand Do They Work
Look, paying off debt is never easy. And theres a lot of buzz surrounding the idea of quick ways to get rid of your debt. Heres the truth: Theres no quick fix. Those tips we just mentioned are the tried-and-true route.
But we dont want to leave you in the dark. Lets take a look at the most-advertised ways to reduce debtand talk about why theyre so crappy.
- Debt Consolidation. This is basically a loan that combines most of your debts into one single payment. This sounds like a good idea until you realize the life-span of your debt grows, which means youre in debt longer. And the low interest rate that sounded so good at first usually goes up over time.
- Debt Settlement. Debt settlement companies will charge you a fee and promise to negotiate with your creditors or reduce what you owe. But typically, they just take your money and leave you drowning in the debt you already hadplus all the new late fees from when no one was paying on your balance.
- 401 Loan. Never borrow from your 401 to pay off your debt. We repeatnever borrow from your 401! Not only will you get hit with penalties, fees and taxes on your withdrawal, but youre also stealing from your own future.
These debt reduction strategies are risky and really only treat the symptoms. You dont need to consolidate, settle or borrow more money to deal with your credit card debt. You do need to change how you manage your money .
Read Also: How To Cancel Jcpenney Credit Card