Do you know the percentage of people who have credit card debt? A study shows that up to 30% have $5,000 and less in debt. 21% have more than this amount. We are talking about more than 40 million people who find themselves in such situations.
You may very well be one of the contributors to the shocking statistics. Debt can be devastating on a personal level. And it could impact your credit score, leading to many repercussions.
It can be difficult to get financing with bad credit ratings. Some jobs may be inaccessible, and even getting an apartment may be impossible. The good news is that there are ways to pay off credit card debt. We’ll show you how below.
1. Watch your finances closely
It is possible to get into debt because of your expenses. The first step is to take an honest look at how to manage your finances. Are your expenses more than what you report?
There are ways to manage spending when paying off debt. You can, for example, reduce your expenses. Give up eating at expensive restaurants. How about cooking a little more at home.
Sign up for platforms like chuck finance can give you a little more control over your finances. You have access to financial information. The platform lets you track your credit usage, ensuring a strong credit score.
You receive notifications about things like overdraft fees, spending limits, and balance updates. Reports come with charts and other visualizations. This helps you get an overview of your expenses.
Experts will also identify and recommend methods for minimizing interest rates. And that’s not all. Analytics provide insight into spending and help you build healthier financial habits.
2. Get rid of expensive sales first
Sit down with a notebook and a pen and write down all your debts. Rank them from highest interest rate to lowest interest rate.
Now set aside a minimum amount on each. Add any extra money you have to high-interest debt. What you are going to do is avalanche debt repayment method.
3. Try the debt repayment snowball method
The snowball method of debt repayment is the reverse of the avalanche method. It forces you to pay the lowest balances first. But, that doesn’t mean you forget to make minimum payments on other debts.
The advantage of this method is that you check off your debts as you settle them. It can be motivating to see sales shrink. As you settle debts, allocate the money you would otherwise pay towards the minimum balance of the largest debts.
4. Use Balance Transfer Credit Cards
Some lenders have the ability to use balance transfer credit cards. They give a window of up to 20 months, interest free. It provides an efficient way to manage high interest credit cards.
Read the terms and conditions of the credit card carefully. After the zero interest term, they will apply interest rates. It is useful to know what it is to avoid any unpleasant surprises in the future. A high interest rate could put you back in credit card debt.
Take note of the transfer fee and the credit limit on the card. There is also a qualifying criterion, which often ranges from good to excellent credit rating.
5. Pay off student loans
If you are a student, take the time to research best credit card for students. There are tons of resources online that can give you the information you need. Just make sure you can meet the payment requirements to avoid going into debt.
What if you have student loans? Well, student loan repayment has the advantage of giving you flexibility and more freedom with your finances. Try to allocate more than the minimum monthly amount to such compensation.
Note that some student loans have higher interest rates. Combine that with credit card rates, and it can be quite overwhelming. In this case, we recommend the avalanche debt repayment method.
Take care of high interest rates on student loans, while making minimum payments on credit card debt.
6. Debt Consolidation
Let’s say you have multiple credit cards. You can erase these debts by consolidating them into a personal loan. A good credit rating can qualify you for amounts large enough to cover the entire balance.
Shop around for loans with favorable interest rates. It should ideally be less than what you pay on credit cards.
7. Borrow from family and friends
Another option available to you is to borrow money from family or friends. The bad news is that you will always be in debt. But, depending on the relationship, they may not charge interest. You have access to money that will help you settle certain balances.
A word of warning though. Money and friendships don’t mix. It is of utmost importance that you pay what you owe at the agreed time. There could be irreparable damage to your relationships if you don’t keep your word.
As attractive as this avenue of debt payment may seem, consider it only as a last option.
Financial prudence can save you from getting into credit card debt. But the reality is that life doesn’t always turn out the way we planned. You could find yourself in debt and need a way out.
We’ve shared some ideas on how to get out of credit card debt.
Some spending habits can land you in hot water. If expenses exceed income, there is a problem. Keep an eye on your finances by signing up for platforms like Chuckfinance.
Use the avalanche or snowball method to settle high or low interest debts.
Manage your spending as you pay off debt by cutting out unnecessary expenses. A good idea is to set a budget and stick to it.
Consolidate your credit card balances by taking out a personal loan and paying them off right away. You can also borrow from your relatives, including family and friends. The only caveat is to make sure you pay them back when agreed.
Good luck with clearing your credit card debt.