Have Credit Card Debt? Here’s how to eliminate these balances.
Sometimes credit card debt is inevitable. If an emergency expense arises that your paycheck can’t cover and you don’t have money to save, pulling out a credit card may be your only option.
But the longer you keep a balance on your credit cards, the more damage it causes. For one thing, carrying credit card debt means continually earning interest which only makes your debt more expensive to pay off.
Plus, having too high a credit card balance can lower your credit score by increasing your credit usage rate (a measure of how much of your total credit you’re using at one time). And the worse your score, the harder it becomes to borrow affordable money when the need arises.
If you are struggling with credit card debt, you are definitely not alone. In fact, 21% of people polled in a recent National Endowment for Financial Education survey say credit card debt causes them stress. Here are some steps you can take to pay off your debt quickly.
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1. Tackle Your Highest Interest Debt First
If you owe money on multiple credit cards, you might be inclined to pay off your lower balance first before switching to cards with a higher balance. But a more cost effective way to do this is to tackle your credit card with the highest interest rate first. The sooner you pay it off, the less your debt will cost you overall.
2. Consolidate your debt with a balance transfer
If your credit score is in good enough shape (which, to be clear, is possible even if you have credit card debt), you may be eligible for a balance transfer. A balance transfer allows you to transfer your existing credit card balances to a new card with a lower interest rate. Some balance transfer cards even offer a 0% interest period for a predefined period – often 12 to 18 months.
By performing a balance transfer, you can lower the interest rate on your debt and make it cheaper. Just read the fine print before you make one, however, to make sure you won’t be paying high fees that nullify your savings.
3. Convert your debt into a personal loan
Like a balance transfer, a personal loan is a good way to consolidate your debt while lowering your interest rate. A personal loan allows you to borrow money for any purpose, so you can take one out, use it to pay off your credit card debt, and then pay off that loan over time.
The stronger your credit score, the more likely you are to qualify for a competitive interest rate on a personal loan. And if you make your monthly payments on time, it could actually improve your credit score.
Being in debt can be extremely stressful, especially when the debt is credit card type. If you are in this situation, it is worth exploring these options to eliminate this debt as effectively as possible. The sooner you do this, the sooner you can move forward with a clean slate.