If you’re wondering how to pay off your credit card debt, you’re not alone. Does, your credit card debt, worry you and keep you awake at night? Are you short of winning the lottery or coming into a large sum of money? You won’t find a quick solution that will make your credit card debt disappear overnight, despite what solicitors or television adverts want you to believe.
There are, however, many reliable ways of paying off your credit card debt. The most popular option amongst consumers is a debt consolidation loan. But there are many other ways. Ultimately, you’ll achieve success and pay off your debt if you follow the below advice.
1. Pay off more than the bare minimum
Your credit card debt won’t go away if you’re only paying the bare minimum at the end of every month. Credit card lenders usually set the minimum repayment per month at around 2% to 3% of the balance. This means that the minimum payments are just paying off some of the interest, and making minimum repayments does not make a difference in your actual credit card balance. If you pay off a little extra every month, you will start to see debt reduction.
2. Make use of your savings if you have some
Paying off credit card debt is the highest form of personal investment you can make. Not having to pay that interest cost each month is, in effect, the same as achieving the same rate of return on any money you invest in. That’s why being free from debt is such an important financial goal that you should aim for.
At the same time, liquidity – which you can think of as an available savings fund or other bank accounts, is indispensable. An emergency savings fund can be the difference between bankruptcy and your financial survival if an unforeseen disaster happens. So, it is really beneficial to have a reserve of savings to help you pay off the credit card debt quicker.
3. Evaluate your current spending habits
Several habits or patterns often lead people to major hardship when it comes to their personal finances. Fortunately, many of these habits or patterns are preventable. Some may require a different way of thinking and others may include overhauling how your money is spent. You need to realise what mistakes you have made and what steps you need to undertake to resolve them in the most effective way.
Here are a couple of simple things that you want to consider getting rid of in order to save money:
- Subscriptions and memberships to gyms, magazines and streaming services. These items might be £3 here, £15 there, but when these costs are combined, they can really add up, and if you choose to cancel these then it can help you make serious financial headway.
- Selling your second vehicle. If your partner stays home and you work close by, this might be an option that could save you hundreds of pounds per month. These savings might be worth the few extra minutes of scheduling hassle you might experience each day from having to share one vehicle. But the financial traction that you will make will be visible almost instantly.
- Dining out. It doesn’t help that mobile apps like Just Eat let you place a delivery order with a few touches of the finger. The more meals that you can prepare at home, the better off your food budget and overall savings will be. Of course, it’s okay to treat yourself and dine out every once in a while, but bear in mind that cooking at home is one of the simplest ways to cut back spending without making dramatic sacrifices.
4. If you have multiple credit cards then deal with one at a time
There are two simple ways to pay off multiple credit card debts. You can either pay off the credit card with the highest interest rate first or the one with the lowest balance. To decide what you think will be best for you, think about whether you’d like to save money on interest rates or get rid of the entire credit card balances as quickly as possible.
Make a list of all your credit cards, and put them in order from the highest to lowest interest rates. Then, pay off the credit card with the highest interest rate, to begin with. Once you pay off the credit card with the highest interest rate, move on to the credit card with the next highest interest rate. Then repeat the process until all of your credit card debts have been resolved.
However, if paying off a credit card faster is more important to you than saving money on the interest rates, then pay your credit cards starting with the lowest balance first instead. When you pay off smaller balances first, you feel like you’re making faster progress. This progress can help keep you motivated with paying off your debts.
If you have unexpected money land in your current account, then it’s always a good idea to use it to help pay off your credit card debts. For example, if you have a £1000 credit card balance and received a £1000 bonus from your job you could pay off an entire credit card and then have one less account to think about moving forward.
5. Consolidate your credit card debt into a personal loan
Taking out a personal loan can be your safest option when you have accumulated credit card debt over a considerable amount of time and see no way out. Personal loans are simple, beneficial and you won’t need to state a reason for your borrowing. It needs to be mentioned though that you are expected to be very cautious when you take a personal loan because if you fail to pay it back, then your financial problems can get worse.
Taking out a personal loan could help you get out of credit card debt. But, do take the time to compare the different loans on the market, including interest rates and terms, before deciding on which one to apply for. Remember, you are trying to get yourself out of debt. Not make it worse.