Are you looking for strategies in reducing credit card debt?
Credit cards in addition to offering extra benefits such as frequent flyer points, are a convenient way to have money “in case of emergency” or as a “buy now pay later” deal in.
As great as that sounds, if you are not smart about how and when you use credit cards you could find yourself in serious debt.
The best way to reduce credit card debt is of course to stop using them or limit the amount you spend on them, however here are 7 strategies anyone can try to reduce credit card debt.
Reducing Credit Card Debt – Repayments Options
If you check your credit card statement more often than not it will show you how long it will take you to pay off the amount you owe, along with amount of interest you will pay.
If you haven’t checked this before the interest may come as a shock!
So, when managing your repayments take into consideration your options such has paying the closing balance prior to the due date, this is a great way to take advantage of any interest free period offered on your credit card.
If you are not able to pay the closing balance, try paying more than the minimum repayment amount, this can help reduce the amount of interest charged.
Paying the only the minimum repayment each month will increase the amount of interest on your card which in turn will take longer and be harder to clear the debt.
Reducing Credit Card Debt – Repayments
A great strategy, often called the Avalanche Strategy, is the process of paying down the credit card debt with the highest interest rate first, while still repaying the minimum on any other debts.
Using this method will limit the growth, due to compound interest, of your debts overall, but keep in mind you may not necessarily be paying the highest balance debt.
On the completion of the first debt, you then put the money used to pay that debt off onto the next highest rate credit card, repeating this avalanche effect until you have ditched your debt!
Create momentum in Credit Card Repayments
The Snowball Strategy is ideal for those people who need encouragement, relying on human psychology it makes us feel we are making progress by completely paying a debt, the positivity from this small “win” cycle builds momentum until all the debts are paid off.
Similar to the avalanche strategy you still continue to pay the minimum repayments on your other debts, once the first debt is cleared you can increase the next debts amount with the money from the pervious debts.
It is important to note that using this strategy while good if you don’t have the discipline and determination to use the avalanche strategy, will be more expensive in the long-term if you have high interest debts, as you are still collecting compound interest on the debt.
Balance transfers for Credit Cards
Strategically balance transfers are a great way to consolidate credit card debt, saving you money and potentially enabling you to pay the credit card off sooner.
Most financial institutes in a bid to get more business, will offer balance transfers on credit cards with interest free terms, your success using this strategy does rely on you paying the debt off as fast as possible within the interest free period.
Consider the terms and conditions of the new credit card carefully, and cancel the old card to avoid the temptation to use the available balance of the old card.
The Set and Forget Method
If paying your credit card debt is your number one priority, setting up automatic payments each pay for your minimum payments, this way the payments will be made before any non-essential spending, and this set up means you will not forget to make any payments.
Spend Less
Anyone will tell you, don’t spend more than you earn and in theory it’s a great rule, however in reality many people don’t, hence credit card debt.
The best way to start spending less is to focus on your spending habits and how you can make cut backs with the extra money you are not spending it can be put towards your debts reducing them faster than if you were to pay just the minimum amount.
Beyond Credit Card Debt
Staying motivated when paying down debt is not easy! A strategy to help you stay positive is to set a goal for when you are finally debt free it could be anything like going on a holiday or getting a new car, set it up so that once your debts are paid you can then put that money towards your goal.
Remember be your own cheerleader and congratulate your self for your small wins!