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4 Ways to Pay Off Credit Card Debt

4 Ways to Pay Off Credit Card Debt

Here’s a sobering fact for you—the Federal Reserve reports that Americans owe a record $1.04 trillion in credit card debt, with an average credit card balance of $6,354. What’s more concerning is that 60 percent of people with a high credit card balance don’t have enough income to pay off their balance.

If you find yourself in that situation, don’t feel bad — here are four smart steps you can take now to help you pay off credit card debt.

1. Consolidate credit card debt

The first step you should take is to consolidate credit card debt, and it basically means combining multiple balances onto one, low-interest loan or credit card. Why is this helpful? Well, the benefits of consolidating debt include:

  • Multiple payments become one convenient payment;
  • Eliminates higher interest rate debt;
  • Reduces the risk of late payments;
  • Encourages confidence; and,
  • May improve your credit score

By reducing your interest rate through consolidation, you can pay more toward the principal balance each month, and might even be able to reduce minimum payment amounts. Debt consolidation can be an excellent and multipurpose financial strategy but only if you discipline yourself not to accumulate more debt.

2. Take a break from spending

It might seem like a no-brainer, but one of the easiest ways to help reduce your credit card debt and pay them off faster is to stop using them for purchases. This could mean not charging large expenses like vacations or holiday gifts, to even finding enough cash to pay for gas, dinners, or any other day-to-day purchases that might rack up your credit card balance.

3. High interest means high stress

According to the 2018 Purchasing Power® Financial Stress Survey conducted by Harris Poll, one of the main causes of financial stress is high balance credit cards. But a high balance is only part of the equation. A high interest rate, even on low-balance credit cards, can prove costly and keep you from paying off debt. One smart strategy is to pay the minimum balance on each of your credit cards, and pay any extra on your highest interest credit card. By doing this, more of your payment will impact the principal balance, reducing the overall amount owed. Repeat this strategy as you work to eliminate the high interest cards in your wallet.

4. Make a financial plan

You might be asking “what is a financial plan?” While it sounds like you need a finance degree to figure this out, that’s not the case. Creating your own financial plan can be really easy. Start by writing out a budget. This will help you stay on task by visually showing where you are spending your money. Check in on your budget each month, and make adjustments when needed.

Next, create a plan for consolidating your debt (as mentioned in step 1). Identify which credit card has the highest interest rate, which one has the highest balance, and which one you might be able to take care of easily using the Snowball Method. By writing out your budget and your plan for paying off credit card debt, you will improve your chances of success.

UFCU Routing Number: 272484894

 

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