Stop Using Your Credit Card
It may seem obvious, but still, it can be very hard. Not only is it a tough habit to break, but if youre putting money toward paying it down, you may not have money to do some of the things you used to do when you were piling up $15,000 in credit card debt.
Cut the card up, give it to someone who will hold it for you or try a time-honored method put it in a large container of water and freeze it. If youre tempted to thaw it out, spend that time as the ice melts thinking about the $15,000 in credit card debt you owe and how desperately you want to get rid of it.
This is where your budget and expense-cutting become your biggest tools. If youve done it right, youll still be able to eat, put gas in your car and even maybe treat yourself to a coffee, all without using credit.
Should I Save For Retirement Or Pay Off My Debt
If possible, make a plan to pay off any debt before heading into retirement. This may mean putting retirement saving on hold until this is accomplished. However, setting aside a small emergency fund first may help give you some peace of mind in the process. Everyones situation is unique, so speaking to an advisor will insure you do whats right for you.
Make A Note Of All The Debts To Be Paid
Instead of looking at your credit card bill at once, which is a lot, break it down into smaller parts. This helps you to categorize it. If you hold more than one credit card, it is advisable to pay off the bill which is on priority.
Now how do you differentiate which bill needs to be paid first? It depends on two criteria which is the interest rate of the card and the outstanding bill.
If you have only one credit card and a total bill of Rs.20,000 for example. It is a better strategy if you divide it into 4. This becomes easier if you see and know that you must pay Rs.5,000 instead of Rs.20,000 at a whole.
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Double Your Minimum Payment
More than 1 in 10 Americans who have credit cards make only the minimum required payment. Minimum payments are enough to cover the interest on your account, so they can keep you from falling behind, but they don’t get you much closer to eliminating your debt. One simple way to make a huge impact is to pay double the minimum. Say you owe $2,000 on a credit card with a 20% APR and a $40 monthly minimum payment. If you could find an extra $40 in your budget and you paid $80 each month, you would save $1,727 in interest and get out of debt more than six years faster.
Consider A Balance Transfer
Another option is a credit card balance transfer, which if you qualify, can help you pay debt faster with a 0% or low annual percentage rate .
The key phrase once again is: If you qualify. Youll need a good credit score and payment history to make this happen.
The way a balance transfer credit card works is that you transfer the credit card debt from the cards you have to a new card that has 0% or very low interest, which makes it easier to whittle down the debt without paying interest during the introductory period. Every dollar goes toward reducing the balance and not spinning your wheels with large interest so you get out of debt quicker.
The catch is, you have to pay off the balance during the 12-18 month introductory period or face interest rates of 18%-24%. Paying off the balance may be tough if you owe $15,000 in credit card debt, or even half of that.
Even with a balance transfer fee of 3%-5% on every balance transferred to the new card, it can still be a good way to pay off that $15,000 debt and boost your credit score at the same time.
The credit limit may not be high enough for all your credit card debt, so if you have more than one card, transfer the balances with the highest interest rates.
The positives to transferring balances to a lower-interest card are that youll have one monthly payment with a lower interest rate.
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How To Get Rid Of Credit Card Debt How I Paid Off $7000 In Just A Few Months
Have you been wondering how to get rid of credit card debt? Lets face it. If youre anything like me, the lure of easy money can call your name especially when youre looking for a little high from some retail therapy.
Or maybe youve just had a string of bad luck. I can tell you firsthand that it isnt hard to end up with credit card debt.
What you need to do now is make it go away, and this guest post by my friend Amanda will show you how she did it.
Amanda Irish is a friend of mine from college and she, like me enjoyed spending money a little too much.
When she finished school she kind of went a little crazyher words not mineand ran up a lot of credit card debt.
In time, she realized she needed to do something about it, so she came up with the plan she writes about below.
I think youll get a lot of good out of it.
So.take it away Amanda Irish.
Improve Your Credit Score
Your credit score gives lenders a glance at how you use your credit. If you have a healthy credit score, it shows youre responsible with managing your credit. The better your score, the easier it may be to get approved for things like loans, lines of credits and credit cards. A higher credit score can also help you qualify for a lower interest rate. If your credit score is low, make sure youre committed to paying down your debt and making your payments on time.
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Why Debt Validation Over Debt Settlement Services
- Pay less than what you would pay if settling a debt
- After a debt is proven to be legally uncollectible, it can no longer legally remain on credit reports
- The average plan is for 36 months, versus 42+months on settlement
- No taxes owed if a debt is proven to be invalid
- Money-back guarantee
- Accounts can sit for over a year before they are negotiated, leaving more time for lawsuits to occur with settlement services. Third-party collection agencies, including Midland Funding, Portfolio Recovery, and Cavalry Portfolio, are issuing lawsuits in under sixty days after receiving credit card accounts, resulting in debt settlement programs becoming much costlier because settlements are no longer attractive. Debt validation can get in front of this change, in many cases disputing the debt before lawsuits occur.
Ask Your Credit Card Issuer For Help
Depending on your situation, you may be able to negotiate with your credit card issuer. You won’t be able to talk down your balance, but you could possibly work out a more favorable interest rate or have your late fees waived. This isn’t necessarily a slam dunk, but a study found that 87% of cardholders polled were able to get their late fees forgiven, while 69% said they were able to get their interest rates reduced. It never hurts to ask.
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Navigating Credit Card Debt During Covid
If youre experiencing a higher amount of credit card debt because of the coronavirus pandemic, youre not alone. Many people may find themselves with more debt right now or may be facing debt issues theyve never encountered before.
If that describes your situation, you may have options.
Weve compiled some resources to help you find relief measures announced by credit card issuers and more. If you can take advantage of these relief measures, they may help ease some of your financial burden, making your credit card debt more manageable. Check out our roundup of those resources below.
Set A Goalstart By Setting A Goal You Can Achieve
Its important to set realistic goals for yourself, especially when theyre about paying off high interest credit cards or other types of consumer debt .
While its easy to quickly run up balances, it takes time and self-discipline to pay them off. Watch how youre doing regularly to stay on track and motivated. Make your financial goals S.M.A.R.T. to keep sight of what youre aiming for. You can learn more about how to set S.M.A.R.T. financial goals here.
Knowing where you want to end up will make it much easier to figure out what you can do to get there. If you ever feel stuck, one of our certified counsellors would be happy to help.
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Borrow From Home Equity
If you own your home, and if there is substantial equity in it, and if you could refinance and take out some cash to liquidate your high-interest credit card debt, and if that would free up extra money in your budget, and if you were absolutely certain you wouldnt start charging beyond your means again, maybe a visit with your friendly mortgage lender, or a competitor, would make sense.
But thats a whole bunch of ifs. The point here: Youre putting your home at risk.
Before you embark on such a radical move, consider scheduling an assessment with a nonprofit credit counseling agency. Their experts are likely to have ways out of your credit card debt hole you never imagined.
S To Rid Yourself Of Credit Card Debt Forever
No one likes being in credit card debt. Its one of the easiest payment methods for overspending, and yet is the most difficult to pay off because of the high interest rates and other fees.
So how can you pay off credit card debt and remain free of it forever? These steps will show you how.
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Negotiating Credit Card Debt
You may be able to call your card issuers to negotiate the terms of your debt. In some cases, credit card companies are open to lowering interest rates or monthly payment amounts for cardholders.
Another option, if you have some money saved, is to propose a credit card debt settlement. With this method, you offer the card issuer one lump sum payment to settle your debt. This way, you save money overall while paying off credit card debt right away.
There are debt settlement companies that offer help negotiating with credit card companies. They also charge fees, though, so it’s more affordable to negotiate on your own.
Paying The Card Bill With The Least Balance
Once you pay off the credit card bill with the higher interest rate, you can switch to the card with the least balance pending.
This completely depends on what bills have accumulated and on which card. It might not always be this way. Sometimes, the bill which is the lowest might be with the card which has the highest balance. In that way, you are clearing off two important bills.
Once you are done with clearing the credit card with the highest interest, you can shift to the bill which has the least pending balance. Paying this provides you with a much-needed mental boost of clearing the rest of the bills.
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What If A Debt Is Proven To Be Valid Or You Get Sued
There is a small chance that a client receives a summons on a debt after joining any debt settlement or validation program. No matter what program or company a person uses, theres always the chance of this happening.
If a summons is received while enrolled on the validation program offered through Golden Financial Services, the consumer is immediately refunded on that account and referred to a settlement law firm that will settle the debt for less than the full amount owed. Thus, the summons becomes a priority and gets resolved right away.
Clients are educated on what to do if they receive a summons at the beginning of their program, so there are never any surprises. For that reason, Golden Financial Services has had no complaints over the last three years and maintains a very positive reputation online, along with an A+BBB rating since 2004.
Contact Golden Financial Services for a free consultation today at
How To Prevent Credit Card Debt
The best way to prevent credit card debt is to pay your cards off in full every month. That’s obviously easier said than done, but there are a few ways to avoid overspending:
- Build an emergency fund. Not all credit card debt is the result of overspending. Sometimes it’s because of a sudden expense that you weren’t ready for. To avoid debt in situations like these, an emergency fund can be helpful. If you don’t have one, it’s never too late to start saving.
- Don’t charge emergency medical bills to a credit card. Unfortunately, medical emergencies can upset finances fairly quickly. Instead of charging your credit card, call your medical provider to find out if they offer low- or no-interest payment plans — or if they’ll give you a discount on your bill. You can also look into getting a personal loan for medical bills. These types of loans generally charge lower interest than credit cards.
- Make a budget. One reason people overspend is that they haven’t set firm limits on how much they can spend. When you have a budget, there’s no guesswork involved. You know exactly how much you can afford each month.
- Track your spending. For a budget to work, you need to follow it. That means you’ll need to stay on top of your spending. A simple way to do this is by using a financial app that you can connect to your credit cards. Mint is a popular option.
Lock But Don’t Close Your Credit Card Accounts
Debt reduction only works if you stop adding to the balance with new purchases. To avoid overspending or accumulating additional debt, you can request your account to be locked or frozen. This will keep your account open, but you won’t be able to use the card to make purchases until it is unlocked. This will help three key elements of your credit score:
- Your the total amount of debt you owe divided by the amount of credit account limits you have open to you will stay low as you pay off your debts and keep your existing credit lines open.
- Your average account age the average time you have had each of your credit lines open grows with every month you keep an account open.
- Your credit mix how many different lines of credit you have open stays high when you have a diverse set of open credit accounts.
Make sure your paid-off accounts aren’t incurring fees for a zero balance, and then check your credit score: chances are it’s gone up and you now qualify for much better terms on future credit.
The Debt Snowball Method
With the debt snowball method, youll focus on paying off your smallest credit card balance first, then youll work your way up to your larger balances.
Follow the steps:
Step 1: Continue to make the minimum payments on all your credit cards.
Step 2: Use your extra money towards the credit card with the smallest balance.
Step 3: When the credit card with the smallest debt is paid off, move on to the card with the next smallest debt.
Step 4: Continue this process until all your debts are paid off.
The snowball method can be a good option for those who have several small credit card debts to pay off. This method lets you see progress faster, but you may end up paying more overall since youre not considering your cards interest rates.
If you have money saved away for a rainy day, you may want to consider using some of your savings to help pay down your credit card debt. If your interest debt is higher than the amount of interest youre earning in savings, youre better off using some of your savings to lower your debt because carrying a high interest on a high balance will cost you more.
Carrying credit card debt can negatively impact your financial future. Paying it down means youll save on interest, improve your credit score and have more money available to put away for emergencies or an important savings goal.
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Find Ways To Lower The Payments
Nothing kills your motivation or progress like paying exorbitant credit card interest rates. Even if you dont miss any payments or go over your credit limit, the interest rate on a credit card account starts out very high compared to other types of debts and loans.
Before creating a plan to tackle your credit card debt, start by finding ways to lower your monthly payment by:
- Negotiating for lower interest rates. Most of the time, a quick call to your credit card company, armed with the details and a simple ask, will result in a lower interest rate. Dont be afraid to negotiate, and try to sell them on why you want to decrease your rate. Make sure you remind them how long youve been a customer, and your plans to continue with them. Be persistent but polite.
- Apply for a balance transfer. If you have good credit, you may be able to take advantage of a 0% interest rate promotion from another credit card. This is not a long-term solution, but it could give you an extra 12 months to pay down your debt with low to no interest fees. A couple of things to consider are the balance transfer fees and the promotional time period. You dont want to get stuck with accrued interest charges once the promotion has expired.
- Consider debt consolidation. If youve fallen behind on your payments or have poor credit, a debt consolidation plan might be the best solution . Several reputable companies offer assistance for paying off debts at a much lower rate than a credit card companys offer.