Credit card debt can be an immense weight, damaging your credit score and forcing you to spend more than you earn. But there are ways out of debt fast; such as switching to a zero interest credit card and using popular debt payoff methods such as snowballing.
1. Create a budget
Budgeting is the cornerstone of becoming debt-free. Credit card balances can quickly spiral out of control, so having a plan in place to ensure you spend no more than you make each month is essential to staying debt-free. A budget can help cut unnecessary spending such as purchasing coffee when it can be prepared at home; as well as help uncover sources of extra income such as starting a side hustle or monetizing hobbies or interests into extra revenue streams.
Once your budget is in place, there are various strategies you can employ to tackle credit card debt. One such technique is known as the “snowball” strategy: this involves paying off smaller balances first to stay motivated as your balances begin to reduce.
2. Reduce your spending
Examining your expenses carefully, especially those which are unnecessary, is key to finding ways to free up more funds to pay off debt. This could involve cutting spending on eating out, movies or sports games, subscriptions such as Netflix you don’t use as frequently, and unnecessary trips to Starbucks – as well as cutting spending in areas that could provide savings and free up money to pay it back faster.
Once your budget is in place, take the time to review your debt balances and annual percentage rates (APR) across each credit card account. Based on your budget and personal preference, prioritize paying off those debts with lowest balances first using snowball or avalanche methods if possible.
3. Pay off your highest-interest rate card first
Financial advisors recommend prioritizing paying off credit card debt more quickly and saving money over the long haul by prioritizing high-interest rate cards first, paying only minimum payments or using balance transfer cards with reduced interest charges. However, many debt consolidation experts advise paying off your highest-interest rate credit card first and quickly paying it off so as to speed up repayment timeframe and save on interest charges in the process.
Create a list of all of your credit card debts, arranged from highest interest rate to lowest. Begin paying minimum payments on all but the one with the highest rate; put as much money towards that debt until it’s gone and use any extra payment toward paying down another high-interest account on your list – also known as snowball or avalanche method. Doing this can save money and motivate you to continue onward with becoming debt free!
4. Talk to your creditor
Creditors operate within an industry of lending money and offering services. Their goal is to keep their customers satisfied, so when necessary they will negotiate a repayment plan which either lowers monthly payments or extends your loan term.
Credit counselors and debt settlement companies can be invaluable allies when it comes to restructuring debt without resorting to drastic measures. Before hiring anyone to negotiate with creditors on your behalf, make sure you conduct some preliminary research.
Before agreeing to any terms, first ensure the original creditor still owns your debt. Original creditors sometimes sell delinquent accounts off to debt collectors for pennies on the dollar; to prevent this happening you should attempt to reach an arrangement with your original creditor beforehand.
5. Stay motivated
Staying motivated on your debt repayment journey requires several strategies. One is rewarding yourself for making progress towards your goal – maybe something as simple as treating yourself to your favorite coffee shop beverage or treating yourself to new shoes as you reach certain milestones.
Staying motivated when it comes to financial goals can be easier by finding people who share them. Consider finding someone else struggling with debt or consulting with a financial advisor for support.
For those struggling with high-interest debt, consider negotiating with credit card issuers in order to lower your interest rate or transfer balances onto one with lower rates. Another solution could be finding help through a non-profit credit counseling agency that offers debt management plans.