Month 3 — Paying Down Credit Card Debt
There are many benefits to focusing on paying down debt. Paying off consumer debt protects your financial stability. It's important to know that keeping credit card debt around 10%-20% of your available credit helps maintain a good credit score. A good credit score can help you make necessary purchases when you need them or secure loans. It also encourages long-term responsible spending habits. Plus, less debt means less money spent on interest charges, extra funds for other necessities, money to put into savings, or to use on discretionary spending. Below are a few simple ways to lower your credit card debt in May (and for the rest of the year).
Ways To Pay Off Credit Card Debt
Timely Payments
- The first place to start when looking to pay off credit card debt is to examine your credit card bills so you know exactly how much you owe, what your minimum payment is each month, due date, and the approximate amount of interest charged to you each month. Paying off credit card debt requires that you aren’t adding to that debt. Make sure you are making your payments on time and in full when possible.
- Keep in mind, if you are only making minimum payments, your unpaid interest charges will accrue and thus increase your balance. Carefully examine your bills to make sure your payments not only cover the minimum amount due, but any interest that is added to the bill each month. This attention to detail will help your balance drop faster all around.
Negotiating Payment Plans Or Rates
- The next place to look for lowering your credit card debt is your own credit card company. By contacting your creditor directly, they may be able to assist you in either setting up a manageable payment plan or lower your interest rate. Many factors can influence a financial institution’s willingness to agree to these types of changes including, credit score, length of relationship with the institution, and financial hardship.
Consolidation
- Some consumers choose to consolidate their credit card debt through personal loans. These loans vary in requirements, including whether or not they are secured through personal assets. The benefits to consolidation include combining multiple debts into one streamlined bill and lowering the amount you pay each month.
- Consolidation loans should only be considered if the interest rate is lower than your current card and won’t significantly increase the amount of time it will take you to pay off the loan.
Snowball Method
- Another way that many consumers with multiple creditors pay down debt is by following the Snowball Method; which is a fairly straight forward (and effective) way of paying off debt. Just follow these simple steps:
- List your debts from smallest balance to largest balance
- Choose your smallest balance to pay off first
- Depending on your budget determine how much extra, if any, you can add to paying down your smallest balance first
- Ensure that your monthly minimum payments are met for all of your other debt
- After you pay off the smallest debt, move on to the next debt with the lowest balance
- As you pay off more debt, the amount you are saving grows, allowing you to pay off debt faster as you go along.
Need Additional Assistance
Speak to Financial Coach — As a member, you have access to financial coaches at BALANCE. A financial coach will be able to help assess your situation, prepare you to talk to your creditors, and create a debt management plan. To speak with a counselor, call (800) 777-7526 or click here for more information.