Credit plays an essential role in how we live, work, and play in the 21st century. Few of us can buy a car or a home with cash, yet both are necessities if we want to travel to and from a job or have a warm place to de-stress at the end of the day. Credit lets us do both. And most of us need a major credit card to purchase services such as internet connection or cable TV.
It’s hard to get anywhere in today’s world without a variety of credit cards at our disposal. But charging too much too quickly can leave us buried beneath crushing debt that’s stressful to resolve.
If you’re currently struggling to figure out how to get out of credit card debt, Wasatch Peaks Credit Union has strategies to help you emerge unscathed. Start small, from wherever you’re able, and build momentum as you go.
Pay more than the minimum due
You must pay at least the minimum due on all credit cards each month to avoid accumulating fees and penalties. But if you pay more, your balances will drop more quickly, and you’ll owe less in monthly finance charges.
While paying more than the minimum due each month on all cards is ideal, it may not be a feasible plan if you carry multiple cards with high balances. In this instance, it may be helpful to try a method referred to as the debt snowball strategy.
Using this strategy, you’ll organize your credit card debt, from smallest to largest, and pay off the smallest balance first. Additionally, you’ll continue to make regular monthly minimum payments on all your credit cards.
Paying off one debt, even a small one, will give you the momentum needed to keep going. You’ll tackle your next smallest debt afterward, and work onward from there, creating a snowball effect of debt resolution.
Use the debt avalanche method
Debt avalanche is similar to debt snowball, except instead of paying off the smallest balance first, you channel extra funds to the credit card balance that carries the highest interest rate. This helps you break free of high monthly interest charges more quickly and frees up more cash for you to allocate toward paying off debt.
Consider a debt consolidation loan
A debt consolidation loan is another effective strategy that many find beneficial to ease the burden of making high monthly credit card payments. A debt consolidation loan pays off the balances on all of your credit cards. In exchange, you’ll pay a single monthly payment toward the balance of the loan.
The biggest benefit is that you can often lock in a much lower interest rate on your loan than you have on your credit cards. Lower interest rates translate into lower monthly payments over the lifetime of the loan.
Transfer high-interest balances
Instead of taking out a debt consolidation loan, you might also consider transferring the balances from cards with high-interest rates to cards with zero percent interest rates.
Many credit cards offer introductory zero percent interest rates on transferred balances for a limited time. This allows you to pay down large balances without the added expense of high finance charges. It does usually mean applying for an additional credit card, however.
Avoid maxing out cards repeatedly
Once you have your credit card debt to a reasonable low, take care not to abuse it again.
Strategies to help prevent this include leaving the majority of your cards locked up at home when you leave the house. This way, you’ll be less tempted to indulge when you see a sale event that looks irresistible. In extreme cases, you can cut your cards up to prevent yourself from maxing them out a second time. When you feel confident that you can use them successfully again, request replacement cards.
Draft a home budget
Devising a home budget is another solid way to help yourself realize where your money is going. Draft your budget according to how much comes in each month and how much must go out and then stick to it religiously. Spending a year on a strict budget can help you find the extra funds needed to minimize crushing debt.
Try credit counseling
If you find you have trouble using credit cards in ways that help your credit instead of harming it, consider enrolling in a credit counseling course. This will give you tips and pointers on how to use your money wisely to prevent falling back into the trap of making stressful monthly payments.
Becoming debt-free and using credit responsibly
When used responsibly, credit cards are a huge boost to your credit score. They tell the world that you’re accountable and take your financial health seriously. But if your credit card accounts are causing you more grief than relief, it’s time to take a close look at how, when, and why you’re using them.
For more information on how to use credit cards responsibly and how to get the most from all they offer, click the button below.