Strategies for paying down debts Watch video,4minutes
Debt
Save
Close save Save
Saved to My Priorities
Read, 2minutes
Key takeaways
To tackle credit card debt head on, it helps to first develop a plan and stick to it
Focus on paying off high-interest-rate cards first or cards with the smallest balances
When you pay more than the monthly minimum, you’ll pay less in interest overall
If you carry credit card balances month to month, paying off that debt fast might be easier than you think. The key is developing a good plan and sticking to it. These four strategies can help you decide which course to take to quickly pay off any credit card debt.
1
Target one debt at a time
Do you carry a balance on more than one credit card? If so, make sure you always pay at least the minimum on each card. Then focus on paying down the total balance on one card at a time. You can choose which card you target in one of two ways:
Focus on high-interest debt
Check the interest rate section of your statements to see which credit card charges the highest interestrate, andconcentrate on paying off that debt first.
OR
Try the snowball method
With the snowball method, you pay off the card with the smallest balance first. Once you’ve repaid the balance in full, you take the money you were paying for that debt and use it to help pay down the next smallest balance.
Article continues below
Debt articles
Strategies for paying down debts Watch video,4minutes
2
Pay more than the minimum
Look at your credit card statement. If you pay the minimum balance on your credit card, it takes you much longer to pay off your bill. If you pay more than the minimum, you’ll pay less in interest overall. Your card company is required to chart this out on your statement, so you can see how it applies to your bill.
Pay a bit extra each month if you can. Every dollar over the minimum payment goes toward your balance—and the smaller your balance, the less you have to pay in interest.
3
Consolidate debt
Consolidating your debt lets you combine several higher-interest balances into one with a lower rate, so you can pay down your debt faster without increasing payment amounts. Here are two common ways to consolidate debt:
Transfer balances
Take advantage of a low balance transfer rate to move debt off high-interest cards. Be aware that balance transfer fees are often 3 to 5 percent, but the savings from the lower interest rate may often be greater than the transfer fee. Always factor that in when considering this option.
Tap into your home equity
If you have equity in your home, you may be able to use it to pay down card debt. A home equity line of credit may offer a lower rate than what your cards charge. Be aware that closing costs often apply.
If you do consolidate, keep in mind that it’s important to control your spending to avoid racking up new debt on top of the debt you’ve just consolidated.
Ready to start paying down debt? Bank of America has credit cards that offer low introductory APRs on qualifying balance transfers.
4
Review your spending
Start by categorizing your monthly spending, for example: groceries, transportation, housing and entertainment. Your credit card statement can be a helpful tool; many issuers categorize your spending. Look for areas where you can cut back. Then take the money you’ve freed up and apply it to paying down your debt.
Pay with cash
One way to manage your overall debt is to consider purchasing things with cash. Using cash or a debit card can help you avoid overspending or making impulse purchases—plus you eliminate any extra fees that may apply when paying with plastic. You’ll also have a clear understanding of how much is going out vs. coming in every week or month.
Use financial windfalls
Commit raises,bonusesor other financial windfalls to debt reduction rather than adding these funds to your monthly spending pool. Using this “extra” money to chip away at your debt can help you reach repayment goals faster.
If you pay the minimum balance on your credit card, it takes you much longer to pay off your bill. If you pay more than the minimum, you'll pay less in interest overall.
The 2/3/4 rule: According to this rule, applicants are limited to two new cards in a 30-day period, three new cards in a 12-month period and four new cards in a 24-month period. The six-month or one-year rule: Some issuers may only let borrowers open a new credit card account once every six months or once a year.
Standards may differ from lender to lender, but there are four core components — the four C's — that lenders will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.
The debt snowball method: paying your smallest debts first
Then, pay the minimum amount each month on all debts, but focus the majority of your efforts on that smallest account. Once your smallest debt has been repaid, move on to the next smallest debt and repeat the process.
Outside of bankruptcy or debt settlement, there are really no other ways to completely wipe away credit card debt without paying. Making minimum payments and slowly chipping away at the balance is the norm for most people in debt, and that may be the best option in many situations.
Pay as much as you can toward your debt. When it comes to avoiding credit card debt, your top priority is generally to pay off as much of your balance as possible each month. ...
The "snowball method," simply put, means paying off the smallest of all your loans as quickly as possible. Once that debt is paid, you take the money you were putting toward that payment and roll it onto the next-smallest debt owed. Ideally, this process would continue until all accounts are paid off.
Pay the full amount of the closing balance by the due date shown on your statement every month - by doing so you can take advantage of any interest free period on your card. If you can't pay the full amount, try to pay more than the minimum repayment to limit the amount of interest charged.
Introduction: My name is Kerri Lueilwitz, I am a courageous, gentle, quaint, thankful, outstanding, brave, vast person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
Strategies for paying down debts Watch video,4minutes 
