How to Get Out of Credit Card Debt
If you have maxed out your credit cards and are wondering if you are ever going to get them paid off, you aren’t alone. More than 45% of Americans have a credit card balance that averages almost $16,000. Credit cards provide a very enticing idea; you charge what you need and only pay a small amount each month until the debt is paid. Unfortunately, the interest rate for a credit card balance is typically between 10 and 30 percent APR. This means that if you have the average debt of almost $16,000, you could end up paying additionally about $11,000 in total interest if you only pay the minimum each month. The high interest rates make it extremely difficult to pay down credit card debt. The good news is, with patience and the following tips, you CAN get out of credit card debt.
Eliminate The Highest Interest First
Use any extra cash you have each month to pay off one credit card. There are a couple of different ways to approach this: you can choose to pay off the credit card that has the highest interest first, which is the quickest way to reduce your monthly interest fees. But, if your goal is to pay off one card at a time, then pay off the card with the lowest balance first. Each time you pay off a credit card, you will have extra cash each month that can be used towards paying off the next card.
Transfer Balances
If you are eligible for a credit card that offers a zero percent promotion rate, you may want to consider transferring the balance of your card with a high interest rate to this card. This will allow you to focus on paying off other high interest cards. It is important to be careful with balance transfers, because there is typically a fee for the total amount transferred.
Lower Interest Rates
In some situations, a simple phone call can get your interest rates lowered. If you have a good credit score, are a long-term customer and make your payments on time, call the credit card company and ask for a lower interest rate. Many will be happy to offer a lower rate as long as you meet the criteria. In some situations, if you have been offered a lower rate by a competitor, call the credit card company and let them, sometimes they will match the offer.
Debt Consolidation
If you have several credit cards and you are struggling to just make the minimum monthly payments, you may want to consider consolidating your debt. Consolidating means all of your debt will be combined and you make one payment each month that is divided up amongst each of your debtors.
The fastest and easiest way to eliminate credit card debt is to quit using credit cards. Preparing a budget allows you to plan to pay cash for the things you need. When you pay cash, you will automatically be spending less than it would have cost you for using a credit card. Using credit cards while you are trying to pay off your debts will delay your efforts of being free from credit card debt.