5 Tips for Reducing Credit Card Debt Quickly
Credit cards are quite convenient for a late-night online purchase here and there or a couple of beers after work, but banks and credit card companies know all about convenience, which is why they dish out thousands of credits cards each week in New Zealand.
Once you start using your new card, these institutions start rubbing their hands together. The higher your credit card balance—and the longer it stays that way—the more money they make on interest.
Much like a personal loan, you may have turned to a credit card for a big-ticket purchase. Maybe it was to finance a new set of wheels, pay for a holiday, or renovate the bathroom. Unlike a loan, however, your credit card can rack up those little extra purchases that add up along the way.
Now is as good a time as any to start paying off your debts, so from early repayments to debt consolidation loans, here are 5 great tips that’ll help you cut up those cards once and for all.
1. Pay more than the minimum repayment
Making the monthly minimum repayment isn’t the same as paying off your credit card debt. The former will find you languishing in debt and paying even more in interest over time, while early repayment offers a light at the end of the debt tunnel.
Card providers love it when you only make minimum repayments, because you’re only just covering the interest on the outstanding amount, and hardly touching the actual debt itself. Examine your most recent credit statements, and you’ll see how much—or in fact, how little—progress you’re making each month.
By putting some extra cash towards your credit card debt, you’ll start to eat away at the debt itself and save yourself a lot of money in the long run.
2. Pay higher-interest debt first
Do you have outstanding debts with multiple credit cards? Take charge! You want to pay off the card that carries the either highest interest rate or the smallest balance first.
Now that you’re making more than the minimum payment, put these payments towards the credit card that accounts for the most damaging share of your debt—the one with the highest rates and fees.
One credit card, for example, may be charged at 12% p.a., while another is charged at 25.99% p.a.
By focusing on this higher-rate card, you’ll end up eliminating your fastest growing debt first and save yourself money.
If the rates on your cards are all about the same, use the snowball method and start with the lowest balance first. It’s a popular way for dealing with these types of debts.
Put your debts in order from highest to lowest. Select the smallest debt and focus all your efforts on paying this off first. Once the lowest debt is gone, move payments you were making to it over to the second-lowest debt. Repeat this process, thereby ‘snowballing’ your way through to your largest debt.
This method will help you pay off your debts much faster and provides great satisfaction. Seeing your debts start to disappear will help you stay focused, and ensure you never have to struggle with debt again.
3. Move them around
Many providers offer low or no interest transfers if you move your balance over from your current bank or charge company. Offers like these are a great opportunity to save on interest and quickly lessen your debts, but only if you’re cautious.
Remember, these lenders aren’t your friends. They are not just doing this to be friendly. They’re betting on you racking up even more debt or not being able to pay off the transferred balance within your grace period. Moving your existing balance could also affect your credit score in the short term, though there are also ways you can improve your credit score later such as bad credit loans and debt consolidation. There’s often a transfer fee hidden in the fine print of the agreement, so be sure to check terms and conditions to see if any hidden fees apply.
With all that in mind, balance transfers could still save your money. Just make sure you’re transferring balances you know you can pay off within the available grace period when interest rates will be lower or non-existent.
If you’re diligent about your payments, the money that would have been lost to interest will now be going towards the debt itself, which helps to get rid of it quicker and easier.
4. Consolidation of debt
Debt consolidation is an effective way to alleviate debt, concentrating all your debts together into one simple, easy-to-manage payment, often at a much lower interest rate than you’re paying now.
If you’re currently struggling with multiple debts and repayments, debt consolidation could be the best answer for you. The process is relatively easy. You just apply for a debt consolidation loan and use the money to pay off your outstanding debts. You’re then left with a single loan payment and a much more manageable monthly budget.
Debt consolidation isn’t just for credit and charge card debt either. You can use a good debt consolidation loan to pay many kinds and combinations of debt. Once you’ve used it to pay off your outstanding debts, you can cut up those cards to protect yourself against the risk of falling back into those unhealthy spending habits.
Apply online in less than five minutes for a personal loan or debt consolidation loan to clean up your debt.
5. Leave your credit cards at home and pay cash
Social outings with friends, or a quick trip to the mall.
All those little impulse buys, from social outing with friends to a quick trip to the mall, add up quickly.
However, like any habit, your carelessness with credit cards can be broken with some commitment and discipline, so make a pact with yourself to leave your cards at home. Use cash or a debit card, which these days can also be used online, to prevent yourself spending money you don’t yet have.
It’s time to cut up the plastic
Before you hit your credit limit yet again, remember how sweet it feels to be truly debt free and make the changes you need to make. Consider a debt consolidation loan from Loansmart if your credit card debt is piling up and remember that our personal loans make great bad credit loans if your debt has been dragging down your credit score. Freedom from debt promises less stress and greater well-being, so what are you waiting for?