Credit cards are handy for making large purchases, earning rewards and some even provide added protection on purchases.
With all that convenience it’s no wonder more and more people are finding themselves with ever-growing balances. Not to mention skyrocketing minimum payments. If you are among the nearly 50% of Americans who carry a credit card balance month to month you may be wondering – what can I do?
The best way to manage your debt is with a budget.
An effective budget will help you build better spending habits by controlling overspending and will ultimately help you save money. Even if you’re already trapped in the repayment cycle, putting together a budget (based on your current debt) can benefit you in the long run.
At Nickels we are all about educating consumers about #creditcardhealth. So, how do you say bye-bye to credit card debt? Unfortunately, there is no easy fix to getting out of credit card debt but with education, persistence and a well thought out budget you can do it!
Four not so hard steps to paying off your credit card debt.
Pay more than your minimum payment.
Credit cards are a form of revolving credit, which means their interest rates can increase over time. If you’re only making the minimum payment, it can take you years to pay off your balance and cost thousands of dollars in interest. PRO TIP: Review the “Card Act” disclosure on your credit card statement to see how long it will take to pay off your current balance, and what it will cost you, if you only make the minimum payment.
Don’t touch that card.
If paying for things with your credit card has been your go-to response, stop! Leave your credit card in your wallet for purchases – if carrying your card is too tempting then leave it at home. Every swipe will be a strike against any progress you’ve made paying down your balance.
Pick a strategy.
If you have multiple credit cards with competing balances, all is not lost. There are two common methods for paying down multiple debts. The Snowball Method, where you focus on paying off your smallest debts first or the Avalanche Method, which focuses on paying off your highest interest rate debts first. No matter which method works for you, having a solid budget will be crucial. You’ll still need to continue making the minimum payment on all your other debts.
Less is more.
If you have multiple credit cards or debts, consolidating them into one fixed monthly rate could be the way to go. Personal loans typically have fixed interest rates, so there’s no more fluctuating payments and you know exactly what to budget and when your debt will be paid. Depending on your credit history, consolidating may even lead to lower interest rates and quicker payoff times.
Mounting credit card debt can be intimidating but with proper planning and a commitment to staying on budget you can regain control of your financial health.
Here’s one more tip to keep you on the path to success – avoid late payments. It’s not just the late fee that will get you. Creditors will report late payments to the credit bureaus if you’re more than 30 days late. This will have a negative impact on your credit report. If you are late on a payment, assess your budget and create a plan for getting caught up as soon as possible.
A 60-day past due report has an even greater negative impact on your credit history. And a missed payment could more than double your next month’s minimum payment!
If you’re ready to cancel your debt, there’s no better time to get started than right now.
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