So You Are In Debt – Here Are 6 Ways To Pay Down Your Credit Card Debt
Credit cards are a great financial tool only if used smartly. Otherwise, they are a sure one-way ticket to a debt trap. If you already have a credit card debt, don’t worry. You can get out of the trap whenever you want to. All you need a good strategy to pay off the debts. But before we get to that, let’s understand how damaging these debts can be.
High balances on your credit cards can be bad for your credit scores. Payment history is the most significant influencer of your credit score. If you let these balances linger long enough, they could keep you from achieving important goals and dreams, such as buying a home, as your credit card debt can affect your overall credit. Although it might seem overwhelming, you can tackle any debt with discipline and determination. Here’s a guide on how to pay off credit card debts even when it seems impossible.
Gather all the information for every card you’re carrying a balance on. Make a note of the balances, interest rates, due dates, and minimum payment for each card. Once you have all of that information compiled, add up the minimum payments on each of your credit cards. This is how much money you must pay each month to stay current on your credit card bills.
Pay Off Debts With The Highest Interest Rate First
This is something which people forget to consider. When you have debts on more than one card, most people would consider paying the one with the lowest balance first. I know it sounds more tempting and can make you feel like a champion for a while. But believe me, the feeling won’t last long. The smart thing to do is clear off debts on the card that charges a higher interest rate first. This way, you reduce your total interest outgo since unpaid dues with higher interest rates accumulate interest faster.
Consider The Balance Transfer Facility
If you are already caught up in a bad debt cycle, the option of balance transfer from one card to another or from multiple cards to one single card is the best option for you. This gives you temporary relief from debts. The second bank allows a credit-free period up to 90 days for more manageable repayment of your pending amount.
Learn To Budget And Follow It
There are many tips for paying off credit card debt, but if you’re not focusing on the overall problem of spending more than you make, it’s easy to stay in the same cycle. By creating a budget that accurately accounts for your expenses and income, you’ll be able to get rid of extra spending and find more money to throw at your credit card debt.
New to budgeting – we have you sorted with a guide here.
Increase Your Income
Earning a higher income is the safest and easiest way to reduce your debt. However, that is easier said than done – because juggling multiple jobs on a limited schedule is not easy. Focus your efforts on your current situation rather than looking for a new job, especially if you are earning very little. It’s time to fly the coop and find a new place if that’s the case.
Ask about receiving a raise or promotion and give solid examples of why you think you deserve a shot. Even if you have a laid-back employer, you need to provide proof of your skills, especially while applying for additional perks. In the meantime, work on your career goals by showing your employer that you are responsible and can handle a team effectively. Always remember that higher positions come with more duties, and you’ll need to prepare for the opportunity when it comes.
If you can afford to adopt a new side hustle, go for jobs you’ll enjoy. Driving for a rideshare company, freelancing, selling handmade items online, and hosting for Airbnb are all common ideas.
Put The Cards Away
Credit cards are extremely appealing because they open you up to making big purchases you can’t afford. Many times spending with a credit card can sometimes make you feel like you’re not giving up real money, causing you to lower your inhibitions. A debit card or cash transactions draw money directly from your account, while credit cards create a buffer between the purchase and payment.
That being said, when you have to pay your credit bill, though, you’ll discover that, yes, this is real money. Every cent is coming out of your bank account. This is why spending by cash is always a good idea because you may find you’re more reluctant to part with your money when you see them leaving your hand. Substantial funds curb extravagant spending and enable you to make better financial decisions. If you wouldn’t rush to spend thousands on a beauty product or high-tech devices, don’t do the same with your credit cards. Instead start an SIP and save money for your personal goals like buying your favorite gadget or vacation.
Follow these steps for kicking debt to the curb, and you’ll be on your way to becoming a financial master. Be patient with yourself, remove your emotional roadblocks, and track your accounts closely — making a slip-up or two isn’t uncommon in the first few months. Once you are out of this mess, get into the habit of investing to achieve financial success. digibank’s monthly investment calculator can help you seamlessly plan your investment moves.