Many people have huge credit card debts due to the bad habit of constantly using credit cards for all their expenses. Think about the stress that is put on you when you are being reminded that you are in debt all the time. It would certainly be better if you pay off all your credit card debts. The following are 5 tips on how to pay off your credit card debts.
- Clear Up the Balance on One Card First
If you carry a balance on multiple cards, you should start thinking about how to clear up the balance on one of the cards first. At the same time, you should also commit yourself to make a minimum payment on each card every month. If you can afford it, you can start paying down the card with the highest interest rate. If you have a lower budget, you can pay off the card with the smallest balance. This will give you the motivation to continue your effort in paying off the next card.
- Pay More Than the Minimum Payment
You can pay more than the minimum payment if you don’t have enough money to pay off the balance of any card. You simply have to pay a few dollars on the minimum payment and it will make a big difference. The smaller the balance, the lesser the interest rate you will pay. When you pay more than the minimum amount, you are reducing the credit utilization ratio which can lead to an increase in your credit score.
- Get a Debt Consolidation Loan
Another option is to consolidate your credit card debts into a single account with a debt consolidation loan. Debt consolidation loans are likely to have a lower interest rate so you can pay off your debt faster. You can get a personal loan to consolidate your credit cards. The lender will pay off your existing lenders one by one and you will pay back the lender with one fixed payment every month.
- Use a Balance Transfer Card
The second method is to use a balance transfer card to consolidate your credit card debts. There are lots of zero interest balance transfer cards which allows you to enjoy zero interest rate charges during the introductory period. The introductory period can last for up to 18 months. During the introductory period, you only have to pay back the actual amount you owe.
- Make Changes to Your Spending Habit
The most important thing is you must change your spending habits. People often end up in debt because they are spending more than their means. The solution is to keep record of all the expenses in an accounting journal. After that, go through it and remove the unnecessary expenses that you don’t need to spend on. It will free up more money for you to pay your credit card debt.
Submitted by Halie Phillips who is a student at the University of Michigan in the School of Business.