If you’re on a journey to become debt free and are dealing with a load of credit card balances, the journey may feel more than a bit overwhelming to you. Spreading all of your credit cards out in front of you and assessing the different balances, minimum payments and interest rates can easily be a day’s worth of work. However, we have some keys that can help you pay your credit cards off faster, accelerating your arrival to financial freedom.
Know the Situation
You’ll have a much better chance at dumping those credit card balances sooner if you know exactly what you’re dealing with. Make a spreadsheet listing every card you own, the current balance due, the current minimum payment due, and the current interest rate, or rates, on each balance or portion of balance. Remember that some of your cards may be carrying different interest rates on different portions of the balance due to balance transfers, introductory rates, and the like. It’s important to know how much interest you’re paying on each balance portion and when the rates are due to change or expire. This will give you a clear picture of where you are right now, and which balances you need to tackle first.
Put out the Fires
Putting out the fires consists of a couple of steps. The first one is to make sure you’re caught up and current on all accounts, and if you’re not, to get current. The second step is to work to transfer balances to lower or zero interest rate cards if possible. Shop interest rates and annual fees using Canadian credit card comparison sites or similar American or UK credit card comparison sites to find the cards available that have the lowest interest rates, longest introductory terms, and the lowest annual fees. Transferring your balances to lower rate cards will ensure you are paying as little interest as possible, which will help you get your cards paid off as soon as possible.
Devise a Plan
Regardless of whether you choose the “Snowball Method” (paying off your cards in order of the smallest balance to the largest balance) or the “Avalanche Method” (paying off your cards starting with the one in which you pay the highest interest rate) or some other method, it’s important to have a plan. Figure out what motivates you: is it the thought of dumping card balances or the thought of paying less interest that motivates you more? Use that information to devise a plan to pay off your credit card debt. Make a budget, figure out where every penny of your paycheck needs to go, and put any extra funds toward paying off your credit cards. Designate the extra money for credit card payoff before your paycheck comes, so that you don’t have the opportunity to spend it on extras that you don’t need right now. This might be difficult, but when that credit card debt is gone sooner rather than later, you’ll be glad you sacrificed your “want” purchases for that time period.
Being debt free doesn’t have to be just a dream. With a little research and planning, debt freedom is achievable for everyone willing to put in the effort to make a plan to get there. With so many options available, there’s a plan to debt freedom for everyone.
What is your best tip for paying credit card balances off faster?