How to Pay Off Debt Fast: Paying Off Credit Card Debt
First up in our series on how to pay off debt fast is the most infamous debt culprit for almost all of us: credit card debt. Most people who have a credit card carry a balance on the card, which means that in addition to paying off the money owed, interest on the balance is also owed. Due to the fact that credit card interest rates can be high, it can sometimes be difficult for people to be able to pay off credit card debt. However, there are some methods you can use to pay off your credit card balance and get out of debt.
The first step, especially if you have multiple credit cards, is to make a list of all your cards and what the balance is on each card. You will also want to write down the interest rate and the minimum amount that is due each month on the card. Once you have this list together, sort them so that the card with the highest interest rate is at the top of the list. Then, add up the minimum monthly payment amounts to find out what you need to pay each month just to stay current on the bills.
With this information, determine if you can possibly transfer the balance from any cards with a high interest rate to a lower-interest card. This small tip can actually save you a great deal of money. You should also call the companies and ask if you can get a better interest rate. This is not always possible, but it does not hurt to ask. If you are successful in transferring card balances or in getting lower rates, adjust your list accordingly.
With this list, you know the minimum amount you need each month. Figure out how much money you can afford to pay monthly, above this total minimum amount, in order to pay off your credit card debt. Once you have this figure, each month pay the minimum amount on all the credit card bills except the one at the top of the list with the highest interest rate. On this card, pay the minimum payment plus the extra amount you determined that you could afford each month. Once the card with the highest balance is paid off, repeat the process with the card with the second highest interest rate, until all your credit cards are paid off. During this pay back period it is advisable to use your credit cards for as few new payments as possible. This will make it easier to reach your final goal of completely paying back all your debt.
If you have several high interest credit cards, you might benefit from finding other sources of money that you can tap so that you can pay off these cards even faster, thus saving money. If you have money in a savings account that pays low dividends, using it to pay off high interest credit card debt can be wise. If you have a home, consider taking out a home equity loan to pay down your credit card debt, as home equity loans are tax deductible and have a lower interest rate than most credit cards.
