Having thousands of dollars in credit card debt can be mentally stressful as well as being detrimental to your overall financial health. Carrying a high balance on your credit card will lower your score over time since FICO considers a high credit balance as a negative component of your credit report. Paying off excessive credit card debt does not have to be lengthy and drawn out process. It is possible to pay off debt quickly with some dedication and restructuring of spending habits. Knowing how to quickly pay off your debt can better assist you in regaining control of your finances.
3 General recommendations
1. Avoid paying minimums
The first way to eliminate credit card debt is to avoid paying only the minimum each month. Although many consumers are aware of this fact, it is still tempting to just slide by and pay the smallest amount each time. However, this will do nothing towards making a dent in a large credit card balance and can often times result in the consumer paying more over time. If eliminating a high credit card balance is a priority then it is essential to make the decision to pay more than the minimum required amount monthly.
2. Put extra funds toward the credit
In addition to paying more than the minimum, it is helpful to plan how much extra money you can put towards your credit card bills each month. If you can make double and triple payments on your credit card bill, it is possible to quickly eliminate balances that might otherwise take decades to pay off. The first step in determining how many extra funds are available to put towards credit card debt is to write out a budget and pinpoint potential money leaks. Small items such as a daily newspaper and coffee may be diverting funds you could be using to pay off credit card bills. Taking the time to look at your complete financial picture and discover hidden money can give you the much needed additional funds to help you meet your debt repayment goals.
3. Consider debt consolidation
Besides eliminating small purchases, it can also be helpful to consider consolidating your payments into one. Take the time to carefully research debt consolidation firms to find one that may be a good fit for you. You can also consider obtaining a debt consolidation loan through your local bank. The interest rate on the loan will most likely be much smaller than the sum total of individual credit card accounts. This singular payment will be much more manageable and will be easier to pay off over time.
Paying off debt quickly may seem challenging but with some dedication and focus, it can be a real possibility. Make sure to take all your purchases and money leaks into account to find hidden sources of money that can be used to pay down credit card debt. In addition, investigating options such as debt consolidation are proactive methods for eliminating debt quickly. Making the effort to reduce your debt using these strategies can help build a sound and secure financial future.
5 Options for debt resolution
When trying to lower credit card payments and eliminate debt, it can be helpful to turn to a professional. There are many different debt solution options to choose from and understanding the differences can help you decide which option is right for you. The five main debt solutions available include debt management, debt consolidation, debt settlement, bankruptcy filing, and a self repayment plan. Becoming familiar with what each option offers is the best way to make the right choice for handling your debt and returning your finances to a stable condition.
- One option for handling debt includes working with a debt management company. A debt management company will primarily offer financial counseling and assist with budgeting and managing expenses. These professionals will help you establish a sound plan for getting back on track towards a healthy financial picture. Debt management companies can also negotiate with your creditors to help you get a lower interest rate to assist in paying off your debt more efficiently.
- Debt settlement companies are another valid option for handling bills and credit. They can assist the client by negotiating down debts and interest rates. They usually charge a monthly fee and will oftentimes make payments directly to the creditors on behalf of their clients. One of the benefits of working with a debt settlement company is that all collection calls will stop and instead communication will occur via the settlement company and the creditors.
- Working with a debt consolidation company to handle debt can be useful when dealing with multiple overdue accounts. These companies work by negotiating down your interest rate and payments and negotiating directly with your creditors. Instead of making multiple payments, the client makes one single payment to the debt consolidation company who subsequently pays the creditors. Debt consolidation companies usually charge a monthly fee in exchange for their services.
- Bankruptcy is a solution to overwhelming debt that cannot be otherwise managed through consolidation or settlement. It is usually a last resort as it has the most long term effects on credit. Not all debt can be included in a bankruptcy filing and in addition, the bankruptcy can remain on a credit report for up to ten years.
- Working with a self repayment plan is an efficient way of handling debt that may be beginning to spiral out of control. A self repayment plan can help you get back on track before the services of a professional are needed. There are many worksheets and budgeting tools available online that can assist in creating a workable self repayment plan.
The five main debt solutions available include debt management, debt consolidation, debt settlement, bankruptcy filing, and a self repayment plan
More Tips for Paying Down Your Credit Card Debt
Too much credit card debt can be a hassle to pay down, especially in these tough economic times. Pay down your debt using these financial management tips.
Stop accumulating more debt
The first step is to recognize that you do have a big problem and that it won’t go away if you keep using your credit cards to rack up more debt. It will take a lot of discipline to stop using plastic all the time but if you can do it, just this one step can really help you pay down your debt. So long as you continue paying more than the minimum amount and stop accumulating more debt then you are on the right track and eventually your balance will go down to zero.
Pay on time
As much as possible, pay on or before the due date to avoid late fees. These fees can add up to a significant amount if you are regularly late on your payments. If the problem is the date itself, you can ask your credit card company to change the date to a more convenient one for you. This can often help with cash flow and financial management problems.
Save up for big ticket items
There are probably a lot of things you would like to buy but it’s not a good idea to use your credit card too much. Don’t buy big ticket items if you can’t really afford it. Start a savings fund for any big purchases you want to make and put money on it every month. That way you won’t have to go into debt to buy expensive items.
Get a better credit card
Shop around and apply for a card with a lower interest rate if you think you can get one. Alternatively, if you want to stay with your current credit card company but want a lower interest rate then you can call your credit card company and ask for a lower rate. Lenders will often lower their rates for long time customers.
Consolidate your debts
Debt consolidation can help you pay less in the long run by using your mortgage or a separate consolidation loan to pay off your high interest credit card debt. Consolidation loans have a lower interest rate so it may be a good choice for you. Talk to a debt consolidation expert to find out if you qualify for this type of loan.
Make additional payments
If you do decide to consolidate, you will normally find that your monthly payments will be reduced. This means that you will have some extra funds you can use to pay down your debt as soon as possible.
Keep making payments and stop using your plastic. It’s not as easy as it sounds but this is a solid and simple strategy that will allow you to pay down your debt and give you peace of mind about your personal finances.
How to Spend Less on Paying Off Credit Card Debt
It might surprise you to know that there are in fact several ways to reduce your credit card debt while paying less money overall. There are two primary ways: getting lower interest rates and reducing fees.
How can you get lower interest rates?
It might take a bit of time and effort but these tips can help you reduce your monthly credit card bills.
- Shop around and look for a card with lower interest rate.
- You can transfer your current balance to that card.
- You should also try calling up your current credit card company and asking for a lower rate. A simple phone call could save you hundreds of dollars!
What should you do when you call? Keep your strategy simple. Tell the customer service representative that you:
- have been a good customer
- want a lower interest rate
- have received an offer for a credit card with a lower interest rate
- are thinking of closing your account and switching to another company
Then ask the service rep “what can you do to help me?” If the company really wants to keep your business then the customer service rep will probably agree to lower your interest rate.
Not everyone will qualify for the lowest interest rates. This is mainly reserved for people who have excellent credit scores. If you regularly receive credit card offers in the mail you probably have a good credit score.
As for the second method of paying less, you should try to reduce your additional credit card fees. Late fees can add a significant amount of money to your balance. Try to pay on time as much as possible so that you won’t be charged more.
These tips are all do-it-yourself stuff but you may need outside help if you are not able to handle matters on your own. If you cannot pay your monthly bills on time, consider using a credit counseling service. The credit counseling company can renegotiate debt payments with your creditors to reduce the total amount you owe. They may also be able to get your interest rates lowered and your late fees waived.
Credit counseling organizations can help you manage your money and develop a household budget. Their counselors are trained and certified to provide professional advice about debt management. They can also help you develop a personalized financial plan. This is a great option for people are unable to manage their credit card debt on their own and need expert help.
Excessive Credit Card Debt Is Not the Problem
Here’s something to think about – excessive credit card debt is not the problem itself, it’s merely the symptom. The real problem is the buy now, pay later mentality. Plastic makes it easy to spend money that you don’t have.
Pre-recession, many Americans were pretty confident about their future earning ability, so much so that they would use their credit card without worrying about how they would pay it off later.
As recently as five years ago, credit card companies could be quite certain that their clients would be able to pay off their debts because less than 5 percent of all accounts were ever charged off for nonpayment. In 2010 that figure rose to 10 percent. This means that approximately one in ten Americans have been unable to pay their credit card bills.
So what’s the solution? People with excessive credit card debt can use credit card counseling, debt consolidation and other such schemes to reduce their debt but this will only treat the symptom, not the problem itself. The solution is to change your spending habits so that you don’t use plastic to buy things you can’t afford.
Here are some simple tips that may help you reduce your credit card debt
- Stop using your credit cards if you already have a large balance on it. If credit cards are just too tempting for you and you tend to go on a shopping binge using your plastic, then close all but one account in case you need it for an emergency.
- Some people even resort to drastic measures like freezing their credit card in a block of ice so that they will think twice before using it. This might work but if you are really so addicted to using your credit cards that you need an artificial method of control, you might be better off just closing all of your accounts. This is only for the seriously out-of-control people who spend too much. Generally speaking you shouldn’t have to do this if you can exercise some self-control.
- Sell your unused items. Did you use your credit card to buy an exercise machine two years ago but now its gathering dust in your basement? Make some extra money by having a garage sale or sell your stuff on eBay.
- Get a second job. If your monthly bills are really too much for you then you may want to consider finding more ways of making money like getting a second job.
The first step to curing your spending problem is to recognize that you can change your habits if you try hard enough. It’s not going to be easy but if you work hard, pay off your debts and increase your savings then you will be much more financially secure.