Many people find it difficult to pay off credit card debt. According to a Federal Reserve Bank of New York research, credit card balances were substantially higher in the 2022 second quarter than in the second quarter of 2021.
To properly pay off your credit card debt, you must take an active role in the process, from selecting your best payment schedule to calling creditors and negotiating rates.
Some of the ways you can lower your debt and finally clear it include:
Write it down
Noting down important numbers linked to your debt is key to reversing your credit card debt:
- List down all your credit card debts and the amounts owed on each credit card
- Interest rates charged on each credit card
- Minimum amount due monthly per card
- Payment dates
- Create a sheet to track your payments
Pause your investments
Any income gets negated as your debt mounts, so you should stop investing until your credit card debt is completely cleared. After all, who wants to invest when everyone is hiking their interest rate?
Minimize your expenses
List your monthly expenses, prioritizing needs rather than wants. By this, you redirect all the cash you would have spent on things you don’t need towards closing your credit card dues.
Switch to cash
The last thing you want is additional debt by charging your card more. Payment in cash avoids further debt buildup and helps you spend less owing to the psychological act of dealing with tangible invoices.
Prioritize credit payments
Determine the order in which you will make your credit card payment every month–before doing anything else. You can start with the least owed to the highest. You may also decide to pay a similar amount each period. This helps you pay the debt owed systematically and also helps you prevent the amount owed from increasing due to the interest charged.
Paying off your debt on each card one by one, you stay motivated while rebuilding your credit score. If your credit score is strong, but your debt payments are becoming too much, try consolidating them into a single account. This way, you just have to make one payment every month to reduce the debt.
Make a payment plan
Some of the payment strategies you can use include:
- Avalanche method: This is accomplished by paying the minimum balance on each credit card each month and putting any additional funds toward the card with the highest interest rate first. According to financial company Symple Lending, making more than the minimum payment saves you money since you will pay less on interest in the long term. It also saves you time.
- Snowball method: This involves paying off your debts from the smallest to the largest. Once you have cleared one debt in full, you put the money you were allocating towards the next-largest debt on your list.
Negotiate with your lender
Have a conversation with your lender to renegotiate better payment terms, like if the interest can be lowered or if they can waive or reduce the yearly fees. Some banks may offer a grace period to allow you to get the money. Talking to your lender can prevent your name from being sent to collections.
Make on-time payments
Calendar your payment schedules a day in advance of the official payment date; this gives you time in case you are falling short of the decided amount. Clearing your credit card debt can be challenging, but when you are armed with the necessary information, you will be able to pick the right strategies for your situation and start the journey of becoming debt free.