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With over $747 billion of credit card debt across the United States, most Americans know far too well how easy it is to fall into a trap of not being able to pay off their credit cards. Because credit cards give the feeling of “free money,” people tend to spend money they don’t have when they have a credit card handy.
If you’re being crushed by credit card debt, first know that you’re not alone. Unfortunately, the average household spends close to $1,300 a year in credit card interest. But that isn’t the way it needs to be.
Here are some strategies and tips you can implement today to help pay off your credit card debt.
Pay With Cash
If you’re trying to pay off your credit card debt while still using your credit card, you’re only digging your financial grave even deeper. To reduce your debt, you need to stop using your credit cards.
Until you see that credit card balance hit $0, stick to paying with cash as much as you can. While you may think the $5 you charge on your daily bagel and coffee won’t do much damage, that can quickly add up — adding to your credit card balance and the amount of interest you pay each month.
Create a Budget
Having a clear budget helps you stay on track financially. Spending outside of your means is what led to your credit card debt in the first place, so create a budget that ensures you don’t spend more than you have.
Within your budget, create a category for paying off debt. The larger you make this portion, the sooner you’ll be out of debt.
Treat Your Payment Like a Bill
While your credit card bill technically is a bill, the minimum you owe is typically only a fraction of the overall amount. When you’re getting by just paying the minimum, you won’t dramatically hurt your credit score, but you can hurt your wallet.
Set an amount much higher than the minimum payment that you will pay each month. Rather than convincing yourself you can pay less this month, treat that payment as you would any other bill. Be sure to pay it in full and on time.
Drop the Annual Fees
Credit card companies suck customers in with enticing sign-up fees and premium offers. While they may seem like great offers when you sign up, they’re rarely as good as they sound. These credit cards also typically come with an annual fee (which may be waived for the first year).
With the number of great credit cards on the market, there’s no reason you should be paying to have a credit card — especially if you’re bogged down with credit card debt. If you have credit cards with high annual fees, pay them off and close them down.
Consider Balance Transfers
Paying interest on credit card debt can be one of the biggest reasons why you struggle to pay off your entire balance. When you’re making payments only to be hit with an interest payment, it can seem like you’re never going to become debt-free.
A balance transfer to a credit card with a 0% interest rate can be just the break you need to pay off your debt and get back on track financially. While most cards will charge you a percentage to transfer the balance, that percentage will typically be much lower than the rate you’re being charged each month.
With balance transfers, just be careful because that promotional 0% APR rate is usually only temporary (it may last for 12 months or 22 months for example) and you may be charged interest on purchases even if your transferred balance has a 0% APR which is why you shouldn’t keep spending on your credit card. Most balance transfer offers also expire within 60 days so if you sign up for a new credit card that allows you to transfer your balance from a high-interes card, be sure to set up the transfer as soon as you can so you don’t forget.
Get a Side Hustle
Side hustles are a great way to make some extra money in your spare time that can be used to pay off debt. Many individuals have been turning to the internet to sell products, create courses or perform freelance jobs in the hours after work.
From blogging to running an online marketplace, there are many different options for creating a profitable side hustle. Driving for Uber or Lyft, or delivering for a service like Postmates, can be another great option for making some additional money to pay off your debt.
Ask for a Lower Interest Rate
If your interest rate is holding you back from paying off your debt, all you need to do is ask your bank to lower it. The interest rate you’re given is contingent on your credit score. If you know that your credit score has improved since you opened the card, ask them to provide you with an updated rate.
While the bank may decline your request, it never hurts to ask. You may be surprised at just how willing they are to help you especially if that means you can pay them back and avoid having to deal with a collection agency or a debt settlement.
Credit card debt can prevent you from reaching your goals financially and may even stop you from living the life you’ve always dreamed of. When you’re swimming in credit card debt, even everyday purchases can make you feel guilty.
When you start tracking your credit score online, you’ll understand the impact that your credit card debt has on your credit and it will motivate you to take action.
When you take the appropriate steps, getting out of credit card debt is possible. Implement a few of these strategies today and you could be surprised at how quickly you can get out of the hole and improve your credit in the process.
Have you ever been in credit card debt? What’s your best strategy for paying it off?
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