Tired of paying credit card bills? It can be stressful and take a nasty bite out of your budget.
Paying off your debt faster not only gets you out from under the stress more quickly, it can help reduce what you pay in the long run.
The best way to make the problem go away is to attack it. Using tools that range from debt repayment calculators to balance transfer credit cards, you can pay off your debt faster.
>> Compare balance transfer credit card offers
How Can You Pay Off Credit Card Debt Faster?
For anyone who has lost income or seen their assets dwindle due to coronavirus, financial survival has just become the priority - and Job One should be paying off your debt as fast as possible.
But to harness that urgency and new-found determination effectively, you need the know-how to make it happen.
In a nutshell, here's how to eliminate credit card debt fast:
- Rein in Spending
- Work on Your Credit Score
- Prioritize Credit Card Balances for Extra Payments
- Attack Debt with the Highest Interest Rate First
- Reduce Interest with a Balance Transfer Credit Card
- Consolidate Credit Card Debt
- Leave High-Interest-Rate Cards At Home
- Calculate Your Debt-Free Target Date
- Don't Neglect Any Payments
1. Rein in Spending
Paying off credit card debt is like bailing water out of a boat - it's useless unless you figure out how to stop more water from coming into the boat.
Plugging the leak in your finances means taking control of your spending so you're no longer spending more than you earn. Otherwise, you'll just see credit card debt continue to rise despite making payments from month to month.
2. Work on Your Credit Score
Credit reports can reveal problems that are costing you money. A low credit score means you'll pay a higher interest rate on your credit card balances.
Check your credit report to see if there are any mistakes that can be corrected or problems you can address in the near term. A boost to your credit score may prevent a hike in your interest rate, or even earn you a lower rate.
3. Prioritize Credit Card Balances for Extra Payments
If you have credit card debt, you may also have other forms of debt like student loans, personal loans or a mortgage. Which do you attack first?
You can't afford to miss the required payments on any of your debt; but when it comes to making extra payments to extinguish debt faster, your credit card balances should be at the top of the list.
Credit card rates are usually much higher than interest rates on student loans, personal loans or mortgages. So, if you get rid of the most expensive form of debt first, you'll pay less interest on the debt that remains.
4. Attack Debt with the Highest Interest Rate First
Continuing the theme of paying down the most expensive debt first, if you have multiple credit cards, you should pay down the most expensive credit card balances first.
Compare the interest rates you are paying on each of your credit cards. Whichever has the highest interest rate should be your primary target for extra debt payments.
Every dollar you put toward getting rid of your most expensive debt will do the most to reduce future interest costs.
5. Reduce Interest with a Balance Transfer Credit Card
You can take this idea of reducing your most expensive debt first a step further with a balance transfer card.
A balance transfer credit card allows you to transfer debt balances you have on other cards to a new credit card. The best balance transfer cards offer a special low rate - sometimes as low as 0% - for a limited period to allow you to pay off that debt without incurring any more interest charges.
Balance transfer cards have a lot of different features and fees. Compare them carefully so you understand which offers give you the best chance of paying down your debt more cheaply.
Just as you should pay off your most expensive credit cards first, you should approach balance transfers the same way. Transferring the balances from your most expensive credit card first does the most to reduce your interest expense.
6. Consolidate Credit Card Debt
Transferring existing credit card balances can be part of a strategy to consolidate credit card debt. Instead of having several balances outstanding, you can combine them into one larger balance.
What good does it do to simply move the money you owe around?
Done right, debt consolidation may yield a couple positive impacts:
- Trading high-interest debt for low-interest debt can save you money.
That means less of your monthly payments go to paying interest and more goes to paying down your debt.
- Combining balances can make your monthly payments easier to handle.
It's a hassle to keep track of multiple payments. By consolidating debt into one payment, you can reduce the likelihood of inadvertently missing a payment and incurring late fees and interest rate penalties.
You have several options for consolidating debt, including personal loans, balance transfer credit cards, low-interest credit cards or even existing credit cards that are not close to their credit limits. It doesn't so much matter which method you use: As long as you transfer higher interest debt into a lower interest form of credit, you win.
>> Use a credit card interest calculator
7. Leave High-Interest-Rate Cards At Home
As part of this process, you should have identified which credit cards are charging you the highest interest rates.
Besides paying those off first or transferring their balances, you also need to stop using those cards. If you must continue to use a credit card, make it one that charges the lowest interest rate.
8. Calculate Your Debt-Free Target Date
The goal of all this should not be simply to move debt balances around or even just reduce your interest expense. The ultimate goal should be to pay off your debt.
For that you need a plan.
Work out a budget that puts as much as possible toward paying down debt. Then use a credit card calculator to figure out how long it would take to get completely debt free by paying off that amount every month.
Budgeting and making larger payments takes effort and sacrifice. Figuring out your debt-free target date gives you a glimpse of the reward. That's the date when that money can start being used to your benefit rather than going to creditors.
9. Don't Neglect Any Payments
As important as it is to prioritize making some payments before others, it is even more important to make at least the minimum monthly payment on all your debt.
As described above, paying down the credit card with the highest interest rate first can save you money. However, if you neglect the payments on your other cards, you will incur fees, penalties and possibly a hike in the interest you pay.
That would defeat the purpose of prioritizing high-interest debt. Make sure you cover all the minimum monthly payments you owe, and then direct any extra to your highest interest debt.
MoneyRates.com can help you with tips and credit card comparisons you can use to take these steps. The sooner you do, the sooner more of your monthly budget could be going to things you want instead of to making credit card payments.