Credit card debt can be difficult to get rid of if you don’t have a plan in place. Simply making the minimum payments each month means very little progress and a payoff date that is years away. Fortunately, there are several ways to learn how to pay off credit card debt fast. Use the tips below to find out how to pay down credit card debt more quickly with a few small changes.
Start by creating or examining your budget. Include all your monthly expenses so you can see exactly where your money is going. Take note of all your debts along with the total amount owed, the monthly payment amount, and the interest rate. Make sure to include miscellaneous items as well, such as haircuts, pet care, and entertainment.
Put a system in place to make sure you stick to your budget. You can even use envelopes for each category and put cash in them that is designated for that expense. If you decide you will only spend $50 each month on entertainment, it will be easy to see when you have run out of cash.
Track Your Spending
Another important part of paying down debt is avoiding the accumulation of more debt. In other words, if you regularly use your credit card for bills or other purchases, your debt will never go away. The cash envelope system mentioned above is a great way to monitor miscellaneous expenses. For example, you may not realize how much you actually spend each month on eating out. Once the envelope for that category is empty, cooking at home would then allow you to put more money toward debt or avoid overspending.
Make a Plan
Once you have all the numbers in front of you, you can use them to determine the best way to move forward. Start by looking for areas where you can lower a payment or cut out items that aren’t really necessary. Then decide which debt to focus on first.
One popular strategy is to pay off the debt with the smallest amount owed first, then add the amount you were paying to the next smallest debt, and so on. This is referred to as the Snowball Method because you will roll more money into each payment as you progress.
Another strategy is to focus on the debt with the highest interest rate. This can be beneficial for paying less in interest in the long run.
Find Better Interest Rates
In some cases, calling your debtor and asking for a lower interest rate will work. They may only take it down a quarter of a percent, but if you continue making the same payment, that is a little extra that goes toward the principal. You are most likely to have success with this tactic when working with a company you have an established history with.
You can also get a new credit card with a 0% APR. When you use this card to pay off another credit card, you won’t have to pay the high interest rates you previously had. Again, keeping your monthly payment the same will allow you to pay down the total more quickly. Remember that you will not have 0% interest forever, so use this time to pay down the total as much as possible.
Pay More Than the Minimum
The best way to pay down credit card debt more quickly is to pay more than the minimum owed each month. This is where cutting back on other expenses or lowering payments can come in handy. Any money that can be reallocated toward your credit card payment (on top of the required payment) will be applied to the principal, not the interest. Not only will your total owed go down more quickly, but the total you pay in interest will also go down since it is based on a percentage of the total.
Get personalized information about how to pay off credit card debt fast with a free assessment from Credit Answers. We can show you how to pay down credit card debt with debt negotiation, as well as other strategies that will work for you.