How to Pay Off Credit Card Debt
Credit card debt has hit a record high of over $1 trillion in 2017. The average American household owes $16,883 of credit card debt and is paying $1,292 just in interest each year. An estimated 43% of Americans have been carrying their credit card balance for more than two years. The longer you carry this debt, the more the interest accrues, which means the more you end up owing. The best thing you can do is to pay off your credit card debt as quickly as possible. These tips will show you how to pay off your credit card debt once and for all!
Figure out how much you owe.
Most people have more than one credit card and don't know how much in total they actually owe. Take a deep breath, look at your credit card balances, and make a note of the interest rates. You can also consider using a free service like Credit Sesame which will show you your credit score, help you manage your credit, and provide you with tips and options to meet your financial goals.
Pay off your smallest debts first.
Make a goal of paying off your smallest credit card balance first. This gets the ball rolling and will help you feel motivated to pay off your other debts. This method, also called the Snowball Method, was pioneered by Dave Ramsey. After budgeting your monthly expenses, including the minimum balance owed on each card, devote any extra money you have towards your smallest balance that you want to pay off first. Once you pay off that one card, the minimum balance that you no longer owe to it can then be used to pay off your other credit cards.
Look into a balance transfer card.
If you have a good credit score (usually 690 or higher), consider transferring your credit card debts to a balance transfer card. Usually, these cards start with zero percent interest for 12 to 18 months an no annual fee. By transferring the balance from your higher interest cards to one with zero percent interest, it's easier to pay off your credit card debt quickly.
Reprioritize your budget.
Use an app such as Wallet or Mint to categorize all of your monthly spendings. You may be surprised by how much money is going towards entertainment or meals out. Look into where you can save money so that you can devote more to paying off your credit card debt. For example, if you're buying lunch out three times a week, cut down to no more than once a week. Use what you would have spent on those other two lunches for your debt instead.
Pick up a side hustle.
Earn extra money to go towards paying off your credit card debt. Use an app like OfferUp to sell anything around your house that you no longer want, such as old clothes, books, home decor, and more. Drive for Lyft or even get paid to carpool using iCarpool. You can also get paid to deliver packages with Amazon Flex or sign up for a service like Carvertise that will pay you to advertise on your car. Any extra income, of course, should be devoted to your credit card payments.
Negotiate with your credit card company.
If you're at the end of your rope, contact your credit card company and asked to be connected to someone who manages debt settlement. Ask if you could move your payment date, cancel late fees, or even take a forbearance on your credit card debt. The representative may even be able to lower your interest rate in order to help you make payments. It doesn't hurt to ask!