Sunday, August 14, 2022

How To Pay Off Credit Card Debt With Little Income

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Solution : Balance Transfer Credit Card

How To Pay Off Credit Card Debt – 3 Strategies for Relief (GUIDE)

Interest-free payments are the fastest way to pay off credit card debt.

If 100% of every payment you make goes to eliminating principal, you can pay off credit card debt fast. The easiest way to get interest-free payments is to use a balance transfer credit card.

This will give you 0% APR for 6 to 18 months after you open the card. However, once the promotion period ends, regular interest charges will apply to whatever balance you have left. Only transfer as much debt as you can afford to pay off during the interest-free period.

Ideal for: $5,000 or less in credit card debt

Balance transfers are usually the best option in this situation. As long as you have good credit, you can qualify for a card that offers 0% APR for at least 12 months. That gives you six months to pay off your debt interest free.

To eliminate a $5,000 transferred balance in full before the regular APR for balance transfers kicks in, youd need payments of about $417.

A Debt Consolidation Loana Balance Transfer Could Also Be A Good Option

When used correctly*, debt consolidation loans and balance transfers are excellent ways to get out of debt.

Consider consolidating your debts with a consolidation loan or transferring your credit card balances to a low rate credit card. However, make sure you understand the terms, conditions, any hidden fees, and the overall interest savings you should get before signing anything.

Cut up and cancel your credit cards if you choose this option. If you dont, you might be tempted to continue using them and further increase your debt load and make your debt even worse than before.

*Unfortunately, debt consolidation loans dont help most people. When people get these loans but dont change the habits that got them into debt in the first place, they just dig themselves deeper into debt. To get ahead using a debt consolidation loan, make sure you track your spending for at least 2 weeks. You also need to create a budget and follow it so that youre not spending more than you earn. Dont become someone who needs another debt consolidation loan to pay off your first one.

Consider The Snowball Method Of Paying Off Debt

This involves starting with your smallest balance first, paying that off and then rolling that same payment towards the next smallest balance as you work your way up to the largest balance. This method can help you build momentum as each balance is paid off. Understand the pros and cons of this debt pay down strategy by reviewing the Snowball versus Avalanche methods of paying down debt.

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Trim Your Expensesfree Up Some Cash To Pay Debt Faster

Speed up your debt repayment and get out of debt fast by reviewing your monthly expenses and looking for ways to cut your costs.

Start by tracking your spending for the next two weeks to find out where exactly your money is going . You might be surprised to learn that making your morning coffee instead of buying a $3 specialty drink will save you over $1,000 a year!

Check your spending to see if you can find more ways to save some money. Every little bit will help you get closer to a life free from credit card debt.

If youd like more ways to save on expenses, we have tons of ideas on our educational website, MyMoneyCoach.ca. Here are some great resources:

Struggling with credit card debt?

Get help from an expert.

Trying to pay off your credit card debt can feel overwhelming, but you dont have to do it alone. One of our professional credit counsellors would be happy to review your finances with you, work with you on making a solid budget for successfully repaying your debt, or work you on special debt repayment solutions if they fit your situation. Speaking with our certified counsellors is always free and confidential.

Get Everything On Paper

How To Pay Off Credit Card Debt Without A Second Job

The first step to paying off your credit card debt as fast as possible, is to write the balance of every single credit card you own on a piece of paper. You need to get everything out in the open so that you know what youre up against.

Now, I will warn you, this might be a little painful.

I can tell you from personal experience that when you tally up all your debts, the math can get a little overwhelming. But dont let it stop you or for that matter scare you. If you want to overcome your credit card debt, your first step is to face it head-on.

So, get out a pencil and paper, and get everything out in the open. Oh, and dont be afraid to hang this piece of paper in a prominent spot so that you see it every day. This is a great technique to help you stay focused and motivated throughout your debt payoff journey.

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Refinance Your Mortgageconsolidate Your Debt With Home Equity

If you own your home, you may have enough equity to consolidate all your debts into your mortgage. If you dont have much equity in your home, additional mortgage insurance costs could be expensive. Consider your options and seek advice from someone other than your lender .

Just like with a debt consolidation loan, when you consolidate debts into your mortgage, you also need to create a budget. If you dont, youll always be tempted to borrow more when emergencies happen.

Repeatedly using your home as an ATM can set you up to face retirement with a lot of debt, no assets, and no savings.

If normal banks and credit unions arent able to help you with refinancing your mortgage, dont immediately turn to a home equity lender. Instead, speak with one of our credit counsellors.

Tip #: If One Solution Isnt Working Try Another

If one option for repayment isnt working, you should move onto the next. Dont wait for the first solution you try to fail.

As soon as you feel like theres trouble on the horizon, adjust your strategy. The goal is to avoid missing payments or falling behind.

Once your creditor writes off a debt due to nonpayment, it limits the options you have for relief. No matter what, if your debts are current, you have options for eliminating them quickly without damaging your credit.

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Get A Balance Transfer Credit Card

Opening a new credit card while trying to pay off another may seem counterintuitive, but promotional offers can make your goal easier to achieve. Many credit card companies offer 0% interest on balance transfers for up to 18 months or longer.

A new balance transfer card can give you plenty of time to pay off your debt fast since you wont be on the hook to pay any additional fees. Compare our top-rated balance transfer cards to find one that will work best for you:

Excellent, Good

Additional Disclosure: Citi is a CardRates advertiser.

Just make sure you dont rack up charges on the old card or add any more debt to your current credit card balance. A balance transfer will apply to each transfer you make if you have multiple credit cards with balances. Just make sure your new balance transfer card has a credit limit to support the amount of your transfers.

I Highly Recommend The Credit Counselling Society

How to pay off debt on a low income

I was hesitant to make this call as I already felt ashamed about my financial situation. I was pleasantly surprised by how understanding and helpful both staff members were that I spoke with. The counselor, CCS gave me great advice and a personalized program to move forward. I highly recommend them!

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Consider Nonprofit Credit Counseling And Financial Assistance

There are many ways to get help developing a credit card payoff strategy. With assistance from reputable financial experts, you might be able to identify your best budgeting method, learn about how to negotiate with creditors or apply for economic hardship programs to lower some of your bills.

A good place to start is a nonprofit agency. These organizations offer free initial consultations to anyone who needs basic help budgeting or exploring debt reduction options. They can help you view your situation holistically alongside other debt you may have, such as student loans or a mortgage. The counseling agency could also get you on a debt management plan, which is a paid service that aims to reduce your credit card debt. Debt management plans aren’t right for everyone, thoughâmore on that later. Find a local credit counselor through a national network like the National Foundation for Credit Counseling.

Using The Avalanche Method To Pay Off Credit Card Debt

Where the snowball method attacks the credit card with the smallest balance, the avalanche method reduces your credit card debt by attacking your credit card that has the highest annual percentage rate or interest rate.

While you use minimum payments to pay against all of your other credit cards, you use as much as you can from your available budget to pay off your high-APR credit card.

Once you have fully paid off the high-APR credit card, you use that same monthly budgeted amount in addition to the monthly minimum payment to pay off the next-highest APR card.

The avalanche method works by striking down the biggest contributor to your increasing credit card debt: interest payments. By paying off your highest APR card, you significantly reduce the amount of interest that you must regularly pay each month.

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Consolidate Your Debt Into Lower Interest Rate Payments

A good idea might be to consolidate your debt into one monthly payment by transferring the balances from your different credit cards to a new single credit card that has a 0% or very low introductory interest rate.

These lower interest rates will help you reduce the amount of interest you are paying back BUT debt consolidation this only makes sense if you can pay off your debt within the time frame of the low introductory rate.

Be sure to read the fine print very carefully so you understand any fees associated with the balance transfer. You also want to make sure you have a good sense of how the interest works.

Dedicate A Set Portion Of Your Income Towards Debt

How To Pay Off All Your Credit Card Debts

If you are swimming in debt or find yourself in a hole, then you will have to determine how much of your income you can dedicate towards paying off your debt.

This of course requires a total introspection into your lifestyle and will require some spending cuts and lifestyle adjustment.

Figure out which areas of your life you can adjust in order to spend more money towards paying off your debt.

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Pay Your Highest Interest Debts

As you turn toward bigger balances, youre going to switch approaches. Instead of paying your smallest debts, attack those with the highest interest rates. This is called the debt avalanche method.

The avalanche method works like this:

  • Make minimum payments on all debts, except the one with the highest interest rate.
  • Pay as much toward the debt with the highest interest rate as your monthly budget allows.
  • After youve paid off this debt, move on to the next highest interest rate.
  • Repeat until all larger debts are paid.
  • It may feel like youre not making much progress with this method, which can sap your motivation. Trust the method and only look at your balance every few months to check your progress. Stay focused on your goal.

    Stop Using Your Credit Cards

    If you want to get out of credit card debt, its time to break up with your credit cards. And you dont have to have a nice dinner or a big conversation with them. Just put them on the table and say, Its not meits you . . . Youre bad for me, my finances and my future. Goodbye. And never look back.

    If you stop using credit cards, youll never run the risk of having a credit card balance. Ever. Again. Start using a debit card and cashyour own real moneywhen you pay for things.

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    How To Pay Off Credit Card Debt When You Have No Money

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    In a Nutshell

    There are a number of strategies to put in place when you find yourself in credit card debt. Common advice includes tightening your budget, prioritizing your highest-interest accounts and negotiating with creditors. But those strategies only work if you actually have some money to put toward paying down your credit card debt. What are you supposed to do if you truly have little to no money to put toward your debt?

    Written bythe Upsolve Team. Legally reviewed byAttorney Andrea Wimmer

  • Let’s Summarize…
  • There are a number of strategies to put in place when you find yourself in credit card debt. Common advice includes tightening your budget, prioritizing your highest-interest accounts and negotiating with creditors. But those strategies only work if you actually have some money to put toward paying down your credit card debt. What are you supposed to do if you truly have little to no money to put toward your debt?

    Picking A Method To Pay Off Your Credit Card Debt

    Exactly how to pay off credit card debt. | FinTips

    Both the snowball method and the avalanche method have been proven to be effective ways to reduce credit card debt.

    Proponents of the snowball method suggest that working on a smaller balance allows you to develop habits that promote credit card health while creating a goal that can be quickly completed.

    Avalanche method supporters contend that building a budget that works against your highest APR card is more financially advantageous, as you are immediately reducing the debt that produces your largest bills.

    Either method can combat your credit card debt, provided you have a full understanding of all of your credit card’s balances. You can also use both debt reduction methods by switching between paying off smaller balances then shifting to cards with high APRs: as best matches your available budget and motivations.

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    Solution : Debt Management Program

    For huge credit card debt balances, you need some help to reach zero.

    If you want to pay back everything you owe to avoid credit score damage, you should use a debt management program.

    With a debt management program, a certified credit counselor will help you negotiate with creditors and consolidate your monthly payments into one payment that goes to the credit counseling agency. Each month, they distribute the payment to your creditors on your behalf. Once everything is paid off in full, the program ends and your accounts may be closed.

    Ideal for: Over $25,000 in credit card debt OR if you have bad credit

    If you owe more than $25,000 or you have a bad credit score, then do-it-yourself debt consolidation solutions probably wont work. That means you can skip balance transfers and debt consolidation loans because they wont be effective.

    Debt management can help you eliminate high volumes of debt within four to five years. In fact, it can often help with huge credit card debt balances$100,000 or more. Although some credit counseling agencies cap their programs at $100,000, there are companies that have no cap.

    Look For Expenses To Cut

    Next, take a look at your spending and evaluate which discretionary, or nonessential, purchases you can eliminate. The ultimate objective in cutting expenses is to find the extra money that will help you pay down debt faster. That might mean cutting takeout spending or shopping secondhand more often.

    Once you’ve cut the things you can live without, consider how to save money on your essential, recurring monthly purchases. Look for bargain deals, coupons or offers on items you typically buylike groceries or home supplieswhich can help you save extra cash while shopping.

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    Why You Need To Start Paying Off Credit Card Debt

    The more debt we are in because of our credit cards, the more stress we have. It can be known to cause anxiety and even problems in relationships.

    You get in too deep and getting out can seem inpossible. Especailly when you dont have extra money to pay them off.

    Racking up $1,000 on your credit cards can take seconds. But paying off that amount can take months or even years.

    But it doesnt always have to be that way. It is possible to pay off your credit cards with very little money.

    See How Much You Can Afford To Put Towards Debts

    So You Want to Pay Off Credit Card Debt? Don

    Take a look at the financial document you created, and determine how much you have left over each month to put towards debts.

    Doing this helps you to determine how much of your debt you can afford to pay off each month.

    You might not have anything left at all this is common if youre earning a low income.

    And, thats where increasing your income comes in, but more on that below.

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    What Financial Advice Would You Have Wished To Hear When You Started Working

    One financial advice I would I knew before when I started working is about the importance of investing.

    All my life growing up the only thing I heard was to get a job to earn an income, pay off your expenses and the remaining save. This is true for the most part but what I should have been taught was to earn an income, a percentage of your income you save, pay off your expenses and the remaining earning you invest.

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