The best way to get rid of your credit card debt quickly is to try and pay off the maximum possible amount each month. Keep in mind that outstanding credit card debt also attracts a high rate of interest which means it will keep getting bigger if not paid off. This is why you should try to pay off the maximum possible amount and bring the outstanding balance to a minimum.
When you get your credit card statement, it will have a minimum amount. However, if you only pay off the minimum mentioned amount on your credit card debt, your outstanding debt will keep increasing as the interest will keep piling on. In the unfortunate event of missing some payments, your credit card debt will increase substantially due to additional charges.
Problems with Credit Card Debt
If you are unable to pay off your credit card debt, it is important for you to stop using it immediately. Get in touch with your credit card provider to make them aware of your financial problems. The credit card provider might suggest a solution to help with your financial situation.
If you keep making only the minimum payment, it is going to take a really long time to pay off the outstanding debt. The minimum payment mentioned on your credit card statement usually only covers the interest and other charges and your principal balance remains outstanding. If you maintain the outstanding debt for a period of more than 18 months, it will become a persistent debt.
If you have a persistent debt issue, your credit card provider is going to get in touch to increase the monthly payments. Of late, some providers have made changes to the terms and conditions of the cards in order to help their customers bring down their debt by increasing the minimum monthly payment. You need to have a good understanding of your budget to be able to pay off the outstanding credit card debt at a faster pace that is also affordable.
Using Balance Transfer to Transfer Debt
With some credit card providers, you also get the option to transfer balance using another card. If you have multiple credit cards, transferring balance from a card with a lower interest rate to a card with a higher interest rate will help you get rid of your outstanding debt at a faster pace.
However, credit cards that offer low or 0% interest rate are usually only available to people with good credit rating. In simple terms, the balance transfer feature to deal with your outstanding credit card debt isn’t an option available to everyone.
Also, balance transfer isn’t always free as there is a fee attached. In most cases, a charge of 2 to 3% is made by the credit card provider as a one-off fee for balance transfers. If you want to use balance transfer to save money on interest rate, these fees will eat into your savings.
If you take advantage of the balance transfer option, you need to close the account and cut up the old credit card. If the credit card is still there, you might give into the temptation of using both the cards which means ultimately, you will have more outstanding credit card debt.
FAQs on Reducing Credit Card Debt
What is the best way to pay off credit card debt?
You have several options. The first thing you need to do is to completely stop using credit card with outstanding debt. It will make sure that you have a fixed amount to repay and your balance won’t keep growing.
Some of these options to pay off the outstanding credit card balance include:
Start budgeting. It will help you discover if you can cut down on spending to save more money which, in turn, can be used to pay off your credit card debt faster. Faster payment of outstanding debt will also help in reducing the interest amount. Use another credit card with 0% interest to transfer balance and pay off this debt regularly.
Think about taking a consolidation loan if you’re able to make the repayments. It will help you get rid of your outstanding credit card balance. However, it is not easy to find a consolidation loan at an affordable interest rate if you have bad credit. Don’t shy away from asking for free advice if you are unable to make your credit card repayments as well as pay off other debts.
What are the advantages of paying off your credit card in full?
If you are able to pay it off in full, it means you won’t have to pay anything as charges or interest, and eventually, it will save you a lot of money. However, you should do that only if it is affordable for you.
Paying off the outstanding credit card balance in full isn’t always the best option, especially in cases:
Where your outstanding debt is more than you are comfortable repaying
You have to cut down your monthly spending significantly
Paying off the outstanding credit card balance gradually is a better option in cases:
Your credit score isn’t good which will make it expensive for you to get a new credit card as such cards usually have a higher interest rate.
It is not possible for you to make the full repayment without cutting down the essential household living costs or other priority bills.
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