It is easy to incur credit card debt given the convenience which this payment method offers. However, it can be a great financial burden given that this is revolving credit and that interest accumulates every month.
By reducing the size of your debt, you will have more income free to cover your other expenses and boost your credit score.
A higher credit score will give you the opportunity to borrow cash online at a lower interest rate in the future. Follow these steps to achieve your goal.
1. Put Your Credit Cards Away
The first step towards paying existing credit card debt is avoiding new debt. That is why you should take your cards out of your wallet and hide them in a place where you will not be tempted to look. Use cash, checks and debit cards instead. If a purchase is beyond your budget, you should not make it.
2. Negotiate Lower Interest
You should call the credit card companies whose products you use and ask for a lower interest rate. The lower interest will help you repay a larger chunk of your balance while reducing financial charges. You can increase your bargaining power by mentioning that you plan to transfer your balance to a lower-rate card. If you mention this, the company may agree to lower your interest by one or two percentage points and possibly more.
3. Make Minimum Payments Automatically
You can set automatic transfer of funds for making minimum payments on each of your cards. That way, you will avoid being charged late fees and save time and effort. This will help you stay disciplined as well.
4. Cut Down Expenditure
You will reduce your credit card debt more quickly and effectively if you allocate more of your income towards repaying it. Your goal is to lower your expenses so that you can make larger payments on your cards. The best method for this is to give up on some luxuries such as books, movies, premium cable TV, eating out and liquor and fancy clothing, shoes and accessories.
5. Repay More
You should try to make extra payments on the card with highest interest every month. That way, you will reach your goal more quickly and save on the costs associated with the highest interest. The larger the extra payment is the faster the repayment and the greater the savings will be.
6. Use Extra Cash for Debt Repayment
Whenever you get a bonus from work, a tax refund or extra cash from another source, you should allocate the money towards the repayment of your credit card debt. This will certainly bring greater long-term benefits than purchasing something. If you want to treat yourself, you can use a small percentage of the funds for something other than getting rid of debt. The sooner you use the extra cash for repaying debt the better.
7. Use Progress Monitoring
Determine and evaluate your progress on a monthly basis. Prepare a list of your remaining debt at the end of each month. Check where you can make improvements. Figure out how to overcome difficulties. You can make a list of your expenses to see where you can make further budget cuts. Get motivated by your achievements.
8. Make Things Competitive
If you try to repay your credit card debt alongside a friend who is in the same situation, you will certainly get more motivation to succeed. You can compete who will allocate more income towards debt repayment and who will become debt-free first. There can be a small reward for the winner. In addition to getting motivation, you will be able to get advice and support. If a particular strategy works for your friend, then it will most certainly work for you too.