If you’re like many Americans, you spend a significant amount of time wondering how you’ll ever be able to pay off your credit card debt. Making the minimum payment and hoping for the best won’t cut it. Here’s what you need to know about tried and true strategies to get rid of those high-interest balances and secure your financial future.
The thought of having $15,000 in credit card debt is overwhelming. Reframe your situation by mentally grouping the debt into smaller chunks: three cards with a $5,000 balance each, for example. If you have multiple cards, list each balance amount, interest rate, and minimum payment. Then, take a look at your budget and determine the amount of money you can put toward your credit card bills each month. If you can’t make at least the monthly payment on each, you’ll need to either cut down spending on other budget items, increase your income with overtime or a second job, or seek help from a credit counseling service.
Now that you’re looking at your credit card debt head-on, it’s time to choose a method of repayment. Refer to the numbers you wrote down above. Let’s say you can dedicate $500 to your credit card debt each month. The minimum payment on each of your cards is $100, which means you have $200 left over. You can opt to put this amount toward either the credit card with the highest interest rate (avalanche method) or the card with the lowest balance (snowball method).
No matter which of the two methods you choose, you’ll be paying $100 to two of your cards and $300 to the third card every month. When the third card is paid off, you’ll be able to pay $100 to one of your remaining cards and $400 to the other. Finally, you’ll be left with one card and paying $500 a month toward the outstanding balance.
From a strictly financial standpoint, it makes the most sense to focus on the card with the highest interest first because it costs you the most over time. However, some people prefer the snowball method because it gives them the psychological win of paying off a small card quickly, which provides the motivation to continue on the right track.
Having a solid plan is the first step to making headway on your credit card debt. Now that you’ve chosen your strategy and are well on your way to becoming debt-free, you can consider opportunities to boost your success by paying down your balances faster. Tricks to try include the following:
If you are unable to make even the minimum payments on your credit card debt, it’s important to seek assistance. Non-profit credit counseling organizations can help you explore options to repay, reduce, or eliminate your debt. These strategies could include:
You will need to gather information about your complete financial picture, including credit card statements, bank account statements, pay stubs, and other documents that will help make the case to your creditors that you are experiencing hardship.
An experienced credit counselor will delve into your financial situation and assist you in reaching a workable solution. When you don’t want to go it alone, contact Solvable for credit card debt relief. We’ll take stock of your bills and match you with well-reviewed companies that can get you on the path to a debt-free future.