Credit card debt can strain your monthly budget and may keep you from achieving other goals, such as buying a house or a car. If you’re feeling overwhelmed by credit card bills and want to pay them off, here are some tips.
Know Where You Stand
Before you can tackle your debt, you need to know how much you owe and how much you’re being charged for interest. Gather your most recent credit card statements and make a list of the balance and interest rate for each card. That information will help you prioritize debt and make a plan.
Figure Out Which Debt to Tackle First
If you try to pay off all your credit card balances at the same time, you may feel overwhelmed and think your situation is hopeless. Instead, focus on paying off one credit card at a time.
Paying off the card with the highest interest rate first can save you a significant amount in the long run. Put as much money as possible toward that balance each month and make minimum payments on your other cards. Once you’ve paid off the highest balance, put money that was going to that card toward paying off your second-largest balance.
The “snowball” approach involves paying off the smallest balance while making minimum payments on other accounts, then moving on to the next-smallest balance. That strategy may not save you as much in interest as paying off your card with the highest interest rate first, but the snowball approach may be helpful because the psychological satisfaction of reducing a balance to zero can motivate you to keep going.
Look Into Balance Transfer Options
Credit card companies often offer balance transfers with low or no interest for a specified period of time. Moving one or more balances to a different card with a lower interest rate may save you a substantial sum in interest charges.
Balance transfer offers carry a fee, which is usually a percentage of the balance moved to the new card. Calculate the balance transfer fee and compare that to the amount you can save in interest to figure out if transferring a balance makes financial sense.
Tap Into Your Home Equity
If you have enough equity, you may be able to use a home equity line of credit to pay off credit card debt. That can eliminate high interest charges, but it will reduce the amount of equity you have in your home. Also, it will switch your obligation from unsecured credit card debt to debt secured by your home. If you fall behind on your payments, you may risk foreclosure.
Trim Your Budget
Track every dollar you spend for at least a month, then ask yourself if there is anywhere you can cut back. Eliminating unnecessary expenses can free up funds that you can put toward credit card debt. Even paying a little bit extra each month can help you eliminate your credit card balances faster.
