If you want to reduce credit card debt, cutting back on extras and sticking with your budget are keys to doing so. This may involve cutting spending such as eating out, entertainment or subscription services you don’t use regularly as examples of unnecessary spending.
Utilize popular debt payoff strategies like the debt snowball or debt avalanche methods to take steps toward debt freedom.
1. Pay More Than the Minimum
Many people attempt to reduce credit card debt by switching their balances over to cards with lower interest rates, but this rarely provides long-term relief. Switching debt may make it harder to maintain discipline and refrain from overspending after you transfer, and may incur transfer fees and a steep jump in the interest rate once the introductory period expires.
Instead, choose a debt repayment strategy like the debt snowball or avalanche method. This strategy involves paying off one debt quickly so as to free up funds that can then be applied towards paying down another card’s balances more rapidly.
2. Negotiate Better Interest Rates
If you have been an excellent cardholder with consistent pay and low credit utilization (keeping it below 30% is key), creditors may be willing to negotiate a lower interest rate for you. Speak to either your manager or credit department and explain your circumstances to see what options exist for reducing it.
There are various strategies available for paying off credit cards, including snowball and avalanche (tackling balances from smallest to largest). But these approaches alone may take years before being effective at eliminating debt.
Debt management programs offer an expedient path to clearing credit card debt by lowering interest rates and offering one monthly payment option instead of multiple. But these programs typically require the services of a trusted credit counselor as well as additional fees.
3. Get a Debt Management Program
Credit card companies may not be malicious entities, but they do make their money off consumers who live beyond their means. Minimum payments only cover a fraction of total balances and may take years before any progress can be seen on clearing some percentage of them at a time.
Credit counseling programs or debt management plans offer another means of quickly getting rid of debt: enrolling in them helps you achieve your goal faster by consolidating all debts into one affordable monthly payment and negotiating better interest rates from creditors. But you must commit not charging anything new while in a DMP.
4. Make a Spending Plan
Credit card debt may seem insurmountable, yet many individuals are able to find relief through consolidation onto balance transfer cards or using popular debt payoff methods like snowball or avalanche payoff strategies.
Effective debt elimination demands self-discipline and determination, including an ability to avoid new debt. That means cutting spending such as eating out or making unnecessary trips to Starbucks.
To stay on track with spending, consider using a budgeting software such as Mint or categorizing monthly expenses into an envelope system or spreadsheet. There are also online calculators that can assist in figuring out monthly payments and interest rates.
5. Freeze Your Credit Cards
Many people find it easier to pay off credit card debt if they take steps such as freezing (or cutting up) their cards in order to stay focused on the task at hand.
Some experts advocate using an “avalanche” method of debt consolidation, in which all your debts are listed in order of size before attacking any that are smaller immediately while making minimum payments on others. Others use the debt snowball method which prioritizes paying off those with higher interest rates first.
No matter which payment method you opt for, it’s vital that your bills are paid on time in order to preserve your credit score and increase its potential.
6. Thaw Out One or Two Cards
Efficient use of credit cards is one way to help you eliminate debt, but it takes dedication and discipline.
One popular strategy for eliminating credit card debt is known as the “debt snowball” approach, which advocates paying off small balances at first to gain momentum and feel accomplished as each balance disappears. A further strategy could include prioritizing paying off higher-interest rates first to save money and reduce stress.
To reduce interest charges, you could consider freezing one or two cards to discourage spending and make repaying debt easier. Furthermore, creating a budget will give you an idea of what amount is affordable each month.