How to Pay off Credit Card Debt | BankruptcyHQ
We understand. We’ve felt the strain that debt can cause. And. It. Sucks. The good news is that things don’t have to stay this way. Learn how to pay off credit card debt using the advice and information provided here. Return this month’s earnings to this month. Then you can start investing more of it in the future you desire.
When you have credit card debt, it can feel like your life is being sucked out of you every month. Months-old purchases are haunting you and preventing you from doing what you want with your money right now.
7 Tips for Paying Off Credit Card Debt Quickly
Here are our top seven tried-and-true methods for paying off credit card debt:
1. Make a financial plan
Without a budget, financial goals will remain unattainable. Why? A budget is a plan for all of your money. Single. Dollar. You’ll never know where your money went if you don’t plan ahead of time. You’ll never be able to tell it where to go exactly.
And you’d like your money to go toward paying off your credit card debt, correct? So, make a spending plan!
Begin by making a list of your earnings (everything coming in) (everything coming in). Then, beginning with your Four Walls, write out your expenses (food, utilities, housing, and transportation) (food, utilities, housing, and transportation). After that, you can add your other expenses.
Subtract your expenses from your income once you’ve accounted for all of your expenses. If you have any extra cash, use it to pay off your credit card debt! If you have a negative number, you should tighten up the other budget lines until you have a zero-based budget. (In other words, your income minus your expenses equals zero.)
Okay! You now have a budget. How can you make it work for you as you work to pay off your credit card debt? Continue reading!
2. Don’t use your credit cards any longer
It’s time to break up with your credit cards if you want to get out of debt. You don’t even need to have a nice dinner with them or have a long conversation. “It’s not me—you,” it simply places them on the table. . . You’re ruining my life, my finances, and my prospects. “Goodbye,” you say, and don’t look back.
You will never run the risk of having a credit card balance if you stop using credit cards. Ever. Again. Start paying for things with a debit card and cash—your own real money.
3. Set aside $1,000 for an emergency fund
If the thought of getting rid of those credit cards makes you nervous because you use them as an emergency fund, get a real emergency fund as soon as possible.
Save $1,000 as soon as possible. Keep it in savings as a safety net against those “life happens” situations. And believe us when we say it’s far superior to a credit card. You will not be charged interest if you pay cash for an emergency. Boom.
4. Make use of the debt snowball strategy
Start paying off your credit cards from the smallest balance to the largest using the debt snowball method. Okay, we understand that interest rates are on your mind right now. But a win is what you need. You need to get rid of one of those credit cards. Quickly.
The debt snowball method is all about increasing your motivation and momentum by attacking one credit card debt at a time—and focusing on the one you can pay off the quickest. That quick victory is extremely motivating and crucial to getting out of debt.
So, how do you go about attacking each credit card? You must either free up more funds or begin earning more. The following hints will show you how!
5. Reduce your expenses
Cutting back on your regular monthly bills is a great place to start freeing up money to put toward debt repayment! You can do this by being more conscious of your electricity usage, meal planning, and generic purchases, among other things.
You’re about to feel like you’ve been promoted. So make sure you’re using this extra cash to pay down debt rather than squandering it on frivolous purchases!
6. Sort through your priorities and cut some costs
It’s time to get a little crazy now. Are you all set? (You are, indeed.)
Retake a look at that budget. You trimmed it down to size. Now take a few branches and cut them off. It may be painful, but eliminating certain expenses from your budget completely is the real money saver.
In this season, what extras can you do without? (Plus, it’s only for a season!) It’s not goodbye—see it’s you later.
Restaurants, entertainment, subscriptions you don’t use regularly, cable, and coffee shop trips are all examples of budget lines you can eliminate (for now). Be truthful to yourself and your budget. What are some things you can live without while paying off your credit card debt?
You’re not taking away all the fun. Simply use your imagination to come up with cost-effective entertainment and incentives! Hey, these small sacrifices now will have a significant impact on your future.
7. Make some extra money
With this tip, you aren’t freeing up and redirecting cash that’s already in your budget—you’re putting more money into the budget. Get yourself a side hustle! Drive for Uber or Lift. Deliver groceries with Shipt or Instacart. Resell your stuff with Poshmark or eBay.
Use the skills you have and tutor, give lessons, take freelance gigs. You don’t even have to leave your couch. There are plenty of work-from-home jobs you can pick up full time (and save money on gas and the commute!) or part-time.
This is an investment of your time that pays off big. Step into the hard work—and make some awesome progress on paying off your credit card debt.
What Are Other Credit Card Repayment Methods—and Do They Work?
Look, paying off debt is never easy. And there’s a lot of buzz surrounding the idea of “quick ways” to get rid of your debt. Here’s the truth: There’s no quick fix. Those tips we just mentioned are the tried-and-true route.
But we don’t want to leave you in the dark. Let’s take a look at the most-advertised ways to reduce debt—and talk about why they’re so crappy.
This is a loan that combines most of your debts into one single payment. This sounds like a good idea until you realize the lifespan of your debt grows, which means you’re in debt longer. And the low-interest rate that sounded so good at first usually goes up over time.
Debt settlement companies will charge you a fee and promise to negotiate with your creditors or reduce what you owe. But typically, they just take your money and leave you drowning in the debt you already had—plus all the new late fees from when no one (no. one.) was paying on your balance.
Unlike the debt snowball, the debt avalanche is a debt reduction method that focuses on paying off the credit card with the highest interest rates first. The problem with this method is rooted in motivation. Remember: Paying off debt is less about math and more about behavior. With the debt avalanche, your first targeted debt might take a long time to pay off. Your motivation will burn out faster than a short-wicked candle. You need quick wins to encourage you to keep going! The debt avalanche takes too darn long to see real progress.
Never borrow from your 401(k) to pay off your debt. We repeat—never borrow from your 401(k)! Not only will you get hit with penalties, fees, and taxes on your withdrawal, but you’re also stealing from your future.
Home Equity Loan.
Also known as a HELOC, this kind of loan borrows against the equity you’ve built up and puts your house up as collateral. In other words, a HELOC trades what you own of your home for more debt—and puts you at risk of losing your house if you can’t pay back the loan on time. Don’t get a HELOC. Period.
Credit Card Balance Transfer.
This is when you move all your credit card debt into one new credit card. You’ll get hit by transfer fees and risk going blind reading the fine print. Okay, that’s an exaggeration—but there’s no exaggeration that a huge spike in interest rates will hit you like a ton of bricks if you make one late payment. This is trading a bunch of problems for one bigger problem. Don’t. Do. It.
These debt reduction strategies are risky and only treat the symptoms. You don’t need to consolidate, settle or borrow more money to deal with your credit card debt. You need to change how you manage your money (using all those tips from above!).
What’s the Trick to Paying Off a Credit Card Quickly?
We already mentioned the quickest (and best) way to pay off credit card debt is the debt snowball method. And this is how you do it:
Step 1: List your credit card debt from smallest to largest. (Remember: Don’t worry about interest rates right now.) Pay minimum payments on everything but the smallest one.
Step 2: Use all the extra money you’ve got from those earlier tips and attack the smallest credit card debt with a vengeance. Once that debt is gone, take what you were paying on it and apply it to the second-smallest debt (while still making minimum payments on the rest) (while still making minimum payments on the rest) (while still making minimum payments on the rest).
Step 3: Once that credit card debt is gone, take what you were paying on it and apply it to the next-smallest debt. The more you pay off, the more your freed-up money grows and gets thrown onto the next debt—like a snowball rolling downhill. It’s unstoppable. You’re unstoppable. That credit card debt doesn’t stand a chance.
Keep repeating those steps until the debt is completely gone. And don’t forget to close your credit card accounts after you pay them off. Then go ahead and dance like nobody’s watching, even if they are. You did it!
All of this, of course, involves work, sacrifice, attention, and time. What if you could accelerate it even further? Financial Peace University, which is exclusively accessible via BankruptcyHQ, teaches you how to achieve precisely that. In the first 90 days of following this strategy, the typical family pays down $5,300.
Imagine your life in 90 days with at least $5,300 in credit card debt paid off. Forever. Try it out for free with a BankruptcyHQ trial!
You’ve got what it takes to succeed. Don’t give up. Use this advice, start using the debt snowball strategy, try BankruptcyHQ, and don’t give up.