A lot of people try to figure out how to pay off credit card debt. The whole thing might look like no big deal. All you need to do is to pay the stated amount of money monthly. However when you have several credits with late payments and overdrafts, things appear to be rather complicated.
Let’s define most important actions useful for fixing financial situation.
Pay more than minimum
Beware of the additional payments you have to do for your credit monthly. The percent you pay for using the borrowed money doesn’t make your actual debt any smaller. You may ask of why you actually get the stated minimal amount in the bill. The answer will enlighten you about how to pay off credit card debt. The creditor is always interested in you paying the minimal amount. This makes you pay the significant sum monthly without lessening your debt.
So be clever. Save some money and make bigger payment for it to touch the debt sum. You will see just how your payments get smaller time after time.
Choose the card you pay first
A lot of people get confused by the variety of bills they get for their multiple credit cards. Some opt for paying off card with smallest balance in order to close it and have one debt less. Others pay off the card with low interest rates.
Before making your choice, get a close look at your financial situation. Do not rely on the advices given by your friends and relatives. Remember, their situation differs from your own.
Do not withdraw money from your emergency funds in order to pay off the debt. Keep your savings intact until the real emergency comes. This will help you later on.
The simplest strategy is to pay off the debt with highest rates. This works in most cases when you cannot figure out the debt to close up first. You will save your money and direct them on the other cards and bills.
Call your creditor
Some people are simply afraid to contact their creditor for credit card debt negotiation. They think the creditor will figure out they have problems with debts. Still the “silence policy” is not the wise one. If you start missing payments, the creditor will see your situation anyway. Still you have the opportunity to fix things before the financial collapse begins.
The possible outcomes are lowering your interest rate, cancelling penalties or even lowering the total sum of the debt.
Also do not avoid creditor calls. The ostrich method is not good enough since you will not get rid of your creditor other way than paying off the debt. You will go on getting letters and calls and may end up face to face with collectors. These guys are not as nice as your creditors are.
Make the debt transfer
Consider removing your debts from the cards with high interest rates and transferring them to 0% interest rate cards if you have any of those. Remember this will most likely damage your credit history for both cards. So do not use this option in case you’re trying to save your credit history.
Still if you came to the spot you only care for your current finances, this is a good way to avoid troubles and have all your bills paid.
Write down your spending
We all tend to do small payments for tiny things that make our life better: the cup of coffee, the lunch at work, the new lipstick etc. All these things have small price. Still when summing them up you get rather significant amount of money. To avoid unnecessary payments, write down all things you buy. This will make you think twice before opening the wallet.
Buy what you need, not what you want
Every time you’re ready to buy something, consider whether you really do need the item. If it’s just the matter of fun like new iPod or precious jewelry, better leave the item in the store. You can live without it as long as you pay off the debt.
If you need something special like clothes, car repair etc., try to use cheap options.
Save some money for emergency
You might already have the emergency fund. As we mentioned in previous chapters, you shall not spend these money on paying off your credit. However in case you do not have this fund, start creating it immediately.
This advice might sound weird. Why saving money at the time you pay off the debt? However there’s a great reason for such behavior. While paying off the debt, you tend to give off all free costs you’ve got. You will bevulnerable in case of trouble. Emergency fund will keep you on your feet.
Do not use your credit cards
Pay cash or through debit cards in every store.Do not touch balance on your credit cards. Remember you’re trying to put some money on your account, not to withdraw them. This will help you to figure out how to pay off credit card debt.
No rewards until the work is done!
It’s rather tempting to prize yourself with some craved luxury when your debt keeps getting smaller. You feel like you earned the sweet bonus for your hard work. However… well, actually you didn’t earn anything yet. You will never do until your debt reaches zero point.
If you praise yourself too early, you might as well end up right where you started.