Owing to the fact that America’s credit card debt currently sits at $841 billion, according to the New York Fed, it is clear that a ridiculously high number of American residents are struggling with credit card debt. Knowing how to pay off credit card debt faster is very vital, and it would save you from countless issues affecting your finances.
But the moment you allow your debt to pile up, it becomes a severe burden for you; it affects your income level significantly and makes it difficult for you to manage money efficiently.
This post will explore several simple yet effective strategies for paying off credit card debt in full without having to rack your brain about it. The cues you are about to learn would prove helpful even if you have been finding it difficult to meet your minimum payment and keep up with other bills. It’s high time you dropped that credit card debt like a bag full of trash.
What Is Credit Card Debt?
Credit card debt is a certain amount of money you owe for purchasing items with a credit card. The debt is expected to be paid monthly most times. Failure to complete payments may affect one’s credit score, making it difficult to take loans in the future.
More importantly, credit card debt is not usually secured. Unlike a proper loan or mortgage, it is not backed by a piece of property such as a home or car that the lender can repossess if the borrower fails to make payments. Nevertheless, not being able to pay your credit card debt will damage your credit score.
How Long Will It Take To Pay Off Credit Card Debt?
The duration of paying off credit card debt depends on the amount owed. But it is safer to speed up your payment term and clear off your credit card debt within 36 months.
Nonetheless, you can speed up the duration of your payment by observing a few important tips. Hence, some of the best-known strategies to pay off credit card debt without wasting time have been compiled in this post.
7 Tips To Pay Off Credit Card Debt Faster
Paying off debt faster is actually possible as long as you know the proper actionable steps that must be taken. Here are some of the best tips that will help you learn how to pay off credit card debt without much hassle:
1. Focus On One Debt At A Time
If you are looking for the best way to pay off credit card debt, you need to target one debt at a time. This advice is valid for anyone using more than one credit card. Instead of trying to pay multiple debts simultaneously, one is advised to focus on one at a time.
Ideally, you are supposed to begin with the minimum balance on any of the cards. After completing the payment, you can move to the next balance. This strategy is known as the snowball method, and it reduces the pressure on you to pay the debt.
On the other hand, you can focus on high-interest debt. This means you should examine the interest rate section of your statements to identify the credit card with the highest interest rate. Stay committed to paying off the balance first before moving on to the next balance.
2. Pay More Than The Minimum
Paying more than the minimum balance is one of the common ways to pay down credit card debt. If you choose to pay the minimum balance on your credit card, you will spend a long time paying off that debt. However, paying more than the minimum would speed up the repayment process. Although this won’t be easy, it is advisable to try this strategy.
Another benefit of paying more than the minimum balance is that it would save you from spending extra money on interest. Remember, the longer it takes to pay the credit card debt, the more money you are likely to lose on interest rates. But if you can pay above the minimum and complete your repayment faster, you would avoid losing more dollars on interest.
3. Stop Using Credit Cards
Avoiding using credit cards helps you live below your means and stabilize your income. But more importantly, ditching credit cards would prevent you from incurring more credit card debt. This is highly recommended if you must pay your debt in time.
In fact, when you stop using credit cards and eventually complete your payment, you won’t fancy the need to purchase anything with a credit card. You will never have to be bothered by high credit card balances anymore.
Moreover, when you don’t use credit cards, it means you would have to start paying for purchases with your hard-earned money, mostly in cash. This spending method does not only prevent you from incurring debt; it also enables you to avoid impulse purchases.
Impulse buying is one of the common challenges that can affect your finances and subject you to living paycheck-to-paycheck.
Still searching for tips for paying off credit card debt? Stop using credit cards henceforth.
4. Get On A Budget
Budgeting is one of the most important things you must never forget while learning how to pay off credit card debt. According to Dave Ramsey, one of America’s most revered financial advisors, money goals can’t become realities without a budget. This is because a budget is simply a plan for your money; how you want your money to be spent and managed.
When you know how to spend and manage money wisely, you will be able to live a debt-free life. Besides, for someone who has credit card debt to pay off, budgeting makes it easier to pay off the debt.
This is because you can prepare your budget to allow you to spend a significant amount of money repaying your credit card debt rather than spending that money on impulse purchases.
If you are a bit confused about budgeting and need help, here is a guide that teaches you how to budget your money in 5 steps.
5. Build An Emergency Fund (Minimum Of $1000)
One of the reasons why people find it hard to stop using credit cards is due to emergencies. They use their credit cards to sometimes pay for impromptu expenses.
However, to learn how to pay off credit card debt faster, you must devise a new plan – building an emergency fund. An emergency fund will help you pay for emergencies instead of borrowing money you’d struggle to repay later.
It’s advisable to save at least $1000 in your emergency fund. Please keep it in your savings account, and don’t spend it unnecessarily until you have an emergency to tackle. $1000 may not sound like a lot of money, yet it’s ideal for a starter fund.
Once you pay off your debt completely, make it a goal to build an emergency fund that can cover 3-6 months of your expenses. This way, it would be difficult for you to fall back into debt.
6. Live Below Your Means
One of the best tips to pay down credit card debt quicker is lowering your bills to free up extra cash. To do this, you must live below your means and spend less.
Examine how much you spend on electricity, phone calls, meal planning, and other essential expenses. If it’s possible to reduce the costs, ensure you do that. Even if it feels like you have enough money to cover your expenses, don’t ever let that compel you to live above your means.
Being frugal and spending less money doesn’t mean you are poor, and it’s just a smart way of gaining control of your finances rather than allowing expenses and credit card debt to choke you.
If you want to learn some of the most effective ways to cut down on costs and save money, check out this list of 25 frugal living tips to help you save money and manage your finances.
7. Generate Extra Income
Making extra money is one of the creative ways to pay off credit card debt faster.
By generating a higher income, you are eliminating the chances of incurring more debt and slowing down the time for repayment. Even if you know how to pay down credit card debt, if you are not earning enough money to cover your expenses and save in an emergency fund, you will still find yourself struggling with debt.
Thankfully, there are many legit ways to make extra money apart from your main paycheck. You can get yourself a side hustle, spending some extra hours every week to make money.
For example, if you own a car, you can drive from Uber or Lift during weekends. If you have digital writing and graphic design skills, you can become a freelancer and earn money by offering your services remotely to clients. Making extra money definitely speeds up the process of learning how to pay off credit card debt.
Pros And Cons Of Paying Off Credit Card Debt Fast
Even though you understand how to pay off credit card debt fast, you must not forget that some advantages and disadvantages also come along. Reminding yourself of these pros and cons would help you make the decision that best suits you when paying off credit card debt.
Here are the pros and cons you should duly consider:
- Helps Your Credit Score
When you maintain a good history of repaying your credit card balance in time, you indirectly improve your credit score. As a matter of fact, many people intentionally ensure their credit card debt is being paid off in time so that their credit score may improve eventually.
Once your credit score is constantly improved, you will easily find lenders to accept your credit applications and offer you favorable borrowing terms.
- Increases Your Credit Limit
If you can successfully eliminate your credit card balance each month, this will show that you have what it takes to manage your debt. Consequently, it will heighten your chances of getting a credit card limit increase.
- No Interest Charges On Your Balance
Paying off credit card debt fast is a brilliant way of avoiding interest charges on your balance. This is because many credit card issuers always charge interest or APR if you extend your credit card balance over to the next month.
This means you would pay interest on top of the unpaid balance you are owing your creditor. You can easily avoid this by ensuring that your credit card balance is paid off in full every month.
- May Be Costly
Knowing how to pay off credit card debt may prove difficult when your balance is high. This means it won’t be easy for you to pay off the balance completely at once. Making a full repayment is usually costly, especially when you don’t have enough money to settle the debt. Nevertheless, paying it off is still advisable instead of allowing it to accumulate further.
- You Might Forfeit Investment Opportunities
To be able to make any investment, you need money, no matter how small. However, if most of your money is used to pay off your credit card debt, it would be difficult or impossible to venture into any investment opportunity. Most of the time, you would have to forfeit the investment until your debt is fully paid. This is one of the downsides to paying off credit card debt fast.
Final Thoughts On Paying Off Credit Card Debt
Repaying credit card debt has to be done intelligently using the proper methods. You must know the appropriate steps to take while figuring out how to pay off credit card debt to avoid worsening the situation. For this reason, this post has explained 7 tips that anyone can safely use to break free from credit card debt and avoid it in the future.
It’s important you know that there are many other strategies and methods for paying off credit card balances. However, many of these methods are not safe.
Strategies like debt consolidation, debt avalanche, credit card balance transfer, and taking personal loans may not work out well for you. Many financial experts don’t recommend these methods since they have proven to make matters worse in some cases.
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