There are two things everyone can agree on about credit card debt:
One: Having it is stressful.
Two: It's not easy to get out of.
It takes time, planning, and diligence, but you can get out of credit card debt. Here are seven tips you can use to start paying off your debt for good.
Unless you only have debt on a single card, you need a strategy. Write down the balance on each card and its annual percentage rate (APR). Then, decide which you're going to pay off first.
The two most common methods are the debt avalanche and the debt snowball. Both require you to make the minimum payment on all your cards. The debt avalanche method suggests throwing extra money toward the card with the highest APR, while the debt snowball method says you should start with the card that has the lowest balance. Once you've paid off one card, move on to the one with the next-highest APR or next-lowest balance.
The debt avalanche method makes sense if you're trying to save the most money overall, while the snowball method is helpful if you struggle to stay motivated and want to see evidence of your progress more quickly.
Comb through your monthly budget and look for money you're spending on things you don't need, like dining out, a gym membership you don't use, or excess cell phone data. Cut every unnecessary expense and put the extra money toward your credit card debt. You can still budget a small amount for entertainment and unnecessary items each month, but most of your extra cash should go toward your debt until it's paid off.
Looking for ways to raise your income is an option if you can't reduce your expenses by much. You can also do this in conjunction with lowering your expenses to help you pay off your debt even faster.
Your current job may offer opportunities to earn extra money, like working overtime or pursuing promotions. You could also start a side hustle or rent out a spare room or property if you have one.
Don't forget about taxes if you're starting your own side business. Your tax return from last year should tell you how much to send in quarterly. Or you can estimate them yourself using this worksheet.
Year-end bonuses, tax refunds, and other windfalls should go toward your debt first unless you need them to cover your essential living expenses. But you can't rely on this strategy alone.
A large payment once or twice per year probably won't be enough to knock out all your debt, but it can help. Build debt repayment into your budget and use any extra money you get as a bonus to help pay back what you owe even faster.
Credit card issuers aren't obligated to change their terms for you, but sometimes they will if you ask politely -- especially if you've been a loyal and responsible customer. Contact your card issuer and request a lower APR so you can pay down your debt more easily. Call out your loyalty if you've had the card for a while and bring up other competitors' credit card offers as leverage.
You'll have the best chance of getting your wish if you contact the company by phone. Be polite, but firm. Avoid making demands or raising your voice. This probably won't make the customer service representative feel inclined to help you.
You can go straight to this step or consider it if your credit card issuer refuses to lower your APR. Transferring a balance to a card with a 0% introductory APR can temporarily halt the growth of your balance, assuming you're not charging any new purchases to the card during this time. This can make it easier to pay off, but if you can't do so within the introductory period, any remaining balance will begin to accrue interest at the card's standard APR.
You must also be mindful of balance transfer fees. They're listed in your cardholder agreement. It's often a percentage of the balance you're transferring and it will raise the amount you have to pay back. Make sure you're comfortable with this before you proceed with a balance transfer.
A personal loan makes sense if you don't want to open another credit card or you want a flat monthly payment. But because these loans are unsecured -- that is, there's no collateral -- the interest rates on personal loans are higher than the rates you'll find with other types of loans. But once you get a personal loan, you don't have to worry about your balance growing any further.
You can use one or a combination of these strategies to pay down your credit card debt. You'll pay down your debt faster if you employ a few of them -- like transferring a balance, slashing your expenses, and boosting your income -- in conjunction. But it's up to you to decide which tips will work best for you.
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