Paying down credit card debt can be daunting, especially if you have more than one credit card. Getting your credit card balances down to a reasonable amount or paid off can take time. Having a strategy can help you get to the goal faster and make it less stressful.
Here are several strategies to help you pay down your credit card debt.
Pay Off the Balance with the Highest Interest Rate First
One strategy is to pay off the credit card with the highest interest rate first. This works so that you pay less in interest fees over the long term.
This strategy is useful if you are focused on saving money. Since you are paying down the highest interest rate first, you will save money on interest.
If you have multiple credit cards, then the next card you pay off should be the next highest interest rate and then next. Just remember you have to pay the minimum amount owed on each card, no matter your strategy.
Pay Off the Lowest Balance First
This next strategy builds on your feeling of success and is best suited if you feel overwhelmed by the credit card debt.
Pay off the lowest balance credit card first. Not only will you feel good, but you can then put the amount you were paying towards this credit card to the next one. You continuously pay off the lowest balance of each card until you are finished.
Again, you must continue to pay the minimum payment each month on the other cards.
Use a Balance Transfer Offer
If you have good credit, you might be eligible to make a balance transfer. You can do this by transferring your balances to a lower-rate credit card you already have or applying for a new card that has a 0% interest rate for a limited time.
There are a few things to keep in mind when choosing this route. First, there may be a transfer fee. You need to weigh your options and determine if the fee is worth the potential savings. The other thing to think about is if you can pay off the transfer amount while the lower interest rate lasts. Many of these offers only last for 12 to 18 months. Some 0% interest rate offers will also charge back rates if the balance is not paid off by the end of the offer. Be sure to read the fine print.
Get a Personal Loan
A personal loan might be an option if you want to consolidate all your credit card debt, and you have good credit. Having one payment might be more manageable for you.
The other advantage is that a personal loan usually has a lower interest rate than credit cards. Just make sure that the monthly payment on the personal loan is something you can afford in your budget.
Small Wins Help Too
In addition to the above, you should consider not using your credit cards while you work on paying down these balances. Do an audit of your credit card monthly recurring charges and see what can be switched to being withdrawn from your checking account instead. You may find it is more difficult to consistently pay the balances down if you continue to charge your credit cards.
If you would like a professional opinion on the financial strategies that are available for your specific situation, contact us and we will be glad to provide you with a complimentary, no-obligation consultation.
This information is being provided for general educational purposes. Equitable Advisors, its affiliates and financial professionals do not offer credit counseling services.