7 Strategies On How To Get Out Of Credit Card Debt
One of the best things to do is to get out of credit card debt. Especially in times of economic uncertainty, it becomes important to put yourself in a solid financial position.
Being in a debt is really a stressful experience. Doesn’t matter what your circumstances are, if you sign for a loan, you are obliged to pay it back. You have to pay even if you encounter a life-altering experience such as losing a job, get into an accident or increase in expenses due to having a child.
Sometimes, the debt could be an unwanted outcome of excessive holiday spending, or overspending any time of the year. A number of people try to get rid of debt and then life slaps them in the face hard enough that they just give up. A great deal of people is getting out of debt every day. Important thing is that they are getting out of debt in a short period of time.
As per Crefitcards.com, around 40% of Americans carry credit card debt from one month to another without paying it off. The website also tells that these credit cards carry 13% interest rate which is higher than average. Therefore, it’s easy to understand why card-holders often try hard to pay down their credit card balances.
According to Liz Weston, an author of “Deal with Your Debt” “says tighter lending standards make it even more important for people to bring down their credit card balances. Many credit avenues are being shut off. Some people are finding their credit limits getting lower and interest rates getting higher.”
Related Article: What Credit Card Can I Get With Bad Credit
A well-structured, visionary approach can enable you to get out of credit card debt whether your balance is $3,000 0r $30,000. You need to follow the below-given strategies to get out of debt as soon as possible.
Strategies To Get Out Of Credit Card Debt
1- Initially, Target Just One Card
If you are carrying balances on more than one card, then it will take a lot of hard work and time to wipe out these debts. So, provide yourself a boost of immediate gratification right from the start. You need to ask yourself that what short-term financial aim will make you feel as though I’m making significant progress on debt reduction.
If your answer is having one card totally paid off, then put as much money as you can toward the card with the lowest balance first. You need to do this even if you have to pay the minimum on other cards at the same time.
If your answer is “boosting your credit score”, then handle the card with the highest utilization rate. It’s your balance divided by the card’s limit. Your score gets higher when you use 20% of your available balance, carrying the utilization rate lower just 20% could noticeably increase your score.
Last option is that if your answer is “paying the minimum in interest” then the tried-and-true method is to pay off the card that has the highest interest rate on priority bases.
2- Ask Creditors For Lower Interest Rate
Another way to get rid of credit card debt is to ask for a lower interest rate. Sometimes just a phone call can reduce the interest rate. However, to get this you must have a credit score, a score of 730 or higher than this. You must be a long-term customer who usually makes payments on time.
By this way, you will get a percentage point or two cut off, this can add up to hundreds of dollars saved per year. Another tip to try is that, if you have been offering a lower rate by a competitor, tell this to the customer service rep. There are chances that they will match the offer.
3- Transfer Balance Cautiously
It’s appealing to transfer credit from one card that has a high-interest rate to another card that comparatively has a lower interest rate. Theoretically, it’s a smart change that will help you to save hundreds of dollars per year. However, you need to be very cautious. You should move credit if you are determined to pay off the debt within a low-interest rate inductor window. This window typically remains for 12 to 18 months after the first billing cycle closes.
Additionally, you are committed to making monthly payments on time. If you fail to do so, your interest rate could skyrocket. Possibly end up higher than the one you just got rid of. One important thing to remember is that, avoid to buy anything with the new card, as sometimes the low-interest rate doesn’t apply to them. Other than this, keep in mind that, you will be charged a credit-transfer fee. This fee is typically about three to four percent of the total amount transferred.
4- Utilize Peer to Peer Lenders
Another way to get out of credit card debt is to use peer to peer lenders. In a perfect world, you would pay off your credit card in full and be free and clear. However, sometimes is not possible, in that case, consider borrowing amount to pay off your credit card from lenders including Prosper.com or LendingClub.com.
These are the secure websites that offer loans with a fixed interest rate. This interest rate ranges 20 to 30 percent which is lower than the credit cards. It means that you can simply save hundreds of dollars in interest on your debt. If you are holding a good job with decent credit score, you can qualify to make an online loan request for about $25,000.
5- Make Two Minimum Payments Each Month
Generally, card issuer charge interest rate on daily basis. Hence, sooner you make a payment; the faster your average daily balance is reduced. This balance translates into fewer dollars in interest that you ultimately pay.
In case, you are bound to a tight budget, more ahead and pay the minimum debt each month. After that, attempt to make the same payment again two weeks later. Keep making a payment of the initial minimum-due amount twice a month until your debt is paid off.
For instance, you charged $2,000 on a card with a 17 percent interest rate. Suppose, you make just the $2,000 on a card with a 17 percent interest rate. You will need at least 21 years to get out of credit card debt. But, if you make an additional payment of the original amount two weeks later, you will be debt-free in less than three years.
6- Make A Plan, Set Goals And Reward Yourself
You need to set realistic dates for when you would likely to pay off the bill. Place the goals at a place where you can see and read them every single day. Work hard to fulfill those dates. Make sure to celebrate your success, whenever you pay off the credit card or other bills. Give yourself some sort of small treats, such as a dinner out, a decadent dessert or a night at the movie.
Get out of credit card debt once you when you pay off accredit card or other bills. After paying the debt to remember that you are not alone on the journey to financial wellness. Working on these practices on an ongoing basis will enable you to enjoy a positive financial future.
7- Find Ways To Make Extra Income
Always try to look for ways to make some extra money. You can find a part-time job. I think you can juggle two jobs, then find a part-time weekend or evening job. To make extra money, you can consider non-traditional activities like a mystery shopper.
Believe me; opportunities like this still do exist. Several market research companies pay consumers to do shopping assignments and provide feedback on their experiences. Popular market research companies will never ask you to pay money if you want to participate.
If you work on these strategies, I am sure, you will get out of credit card debt soon.