It is always important to be in a solid financial position. And the first step to achieve it is to dig out of the credit card debt. Credit cards can be a one way ticket to debt traps if used recklessly. The United States is a nation in debt. An average American carries a debt of $6,500 in credit card debts.
A majority of the Americans spend way more than they earn every month. Therefore, they use credit cards to reduce this gap. Hence we see how many people struggle with their debts. Some may choose to bury their heads in debt but the same people are forced to confront the circumstances at some or other point in their lives.
Ways To Clear Credit Card Debt Faster
1. Take Note Of Your Debts
The first thing one should do to achieve the target of freeing himself from the credit card debts is to know how deep he is in debt. Many people simply don’t know the amount of debt. They may believe it to be $15,000 when in fact it may be $20,000. You can never achieve your targets if you do not know where the target is!
2. Pay More Than The Minimum Payment
Most of the Americans pay only the minimum amount payable of their credit card bills. What they do not consider is that the amount left to pay will compound itself over to a huge amount considering the high interest rates that credit cards charge.
3. Create A Budget
It is one of the most important things to do when planning to reduce your credit card debt, or any other debt for that instance. While planning the budget, it is important to be realistic. It is important to cut back from the unnecessary expenses but you should not be cutting out from the essential needs. It is nearly impossible to change your lifestyle.
What you can do is cut down your dinners by 2 or 3 in a month, you can change your thermostat by a few degrees, and you can change your Netflix plan. You can write down 3 to 4 ways by which you can reduce your monthly expenses by reducing or simply cancelling them.
4. Track Your Expenses
You should write down all your regular expenses like car payments, mortgage, insurance, minimum credit card payments, gym, cable, etc. and then keep a record of other expenses like your visit to a restaurant or a movie theater. This way, you will know where you are spending more than you should and will provide you an option to cut down on the unwanted expenses.
5. Choose A Payoff Strategy
There are 2 common strategies which people use to pay their debts.
The first is to list all your debts from the smallest to the largest. Then, pay the minimum payment on all your cards and use the excess funds to pay the smallest balance. Then, pay the next smallest balance. Though this is not a cost effective way of eliminating your debt, it sure gives a breather and is many a times, gives a psychological boost too.
The other strategy is to list all of your debts with their interest rates, from the highest to the lowest. Pay the minimum payment on all of your cards and then use the extra money to pay off the debt on the card with the highest interest rate. This way, you will be able to reduce your debt faster.
6. Talk To Your Credit Card Company
You should talk to your credit card company to reduce the interest rate on your credit card. It may become difficult for you to settle at later stages, hence it is advised to talk to them and explain your situation.
7. Consider A Balance Transfer
If your credit card company doesn’t help you in reducing the interest rates, you can avail the benefit of balance transfer. This way you can transfer the debt from the card with higher interest rate to the card with lower interest rate. This is a very good way to reduce your future debt. Also, it gives you a temporary relief. Many cards don’t even charge a balance transfer for 60 or 90 days.
This way, not only will you be able to save money on interest, you can also pay down your debt faster.
8. Use Cash
A very important thing to do which reduces your current debt is to use cash instead of credit cards. Not only this, using cash will also help you in not increasing your debt in the future which might rise by using credit cards at places when you don’t require the items.
Not only this, when you pay by cash, it will also help you to save 20 percent. It will help you to separate your needs from your wants.
9. Opt For Automatic Payment Facility
This is a good way to reduce future debt. When you opt for this option, the bill amount will get deducted from your bank account automatically, and you wouldn’t have to worry about missing deadlines and especially about the late payment fee.
10. Track Your Bills Periodically
You should never miss the fine prints of your credit card bills. There may be miscellaneous charges levied by the bank. Sometimes, there may be erroneous transactions payable to be due from your card. Therefore, it is always suggested to review your bills periodically and not just put them in a corner.
11. Track Your Progress
An important part of reducing your debt is to know if you are on the correct path or not. You should review your progress on a weekly and a monthly basis and see if you have achieved your targets of reducing your debt and cutting down on the spending or not.
The Bottom Line
Credit cards are an amazing financial tool. However, they are beneficial only is used smartly. If used recklessly, they can be a burden to you. If you follow the tips mentioned above, you will definitely be able to clear your credit card debt faster than you can even imagine.