How to Pay Off Your Credit Card Fast
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In this post we are going to look at different methods of how to pay off your credit card fast. Credit cards can be a great tool if you know how to use them. Otherwise, they can become weapons of mass destruction for your finances. Falling into credit card debt is as easy as not noticing which payment method was activated. This is just one of the five typical credit card mistakes.
Once you enter the spiral of card debt, it is easy to never find your way out. Ending credit card debt is an arduous road, but one well worth the journey. The ultimate prize, being debt-free, will change your life.
Key Takeaways
- Take Inventory
- Review and Change Your Payment Method
- Choose a Strategy and Stick With It
Do you want to take care of your finances? Pay off your credit card debt.
High balances and high fees can put real pressure on your wallet and limit your financial opportunities. If you let these factors affect you long enough, they can keep you from achieving other important goals and dreams, such as buying a house or a car.
Whatever your financial goals and dreams, paying off your high-interest debt is the first important step in the right direction. Here we give some concrete tips on how you can do it in a good way.
Get organized. Step 1 is to gain control. Collect all your credit card information. Record amounts, interest, due date, and minimum payment for each card. How bad is it?
Do you have lots of transactions spread across many different cards? Do you have several large debts or several small ones? Have you accumulated your debts into one card but do not seem to be able to make any progress in paying if off?
Place the lowest possible payment on all your credit cards. Figure out how much money you have to pay each month just to meet the fees. Can you afford to pay more than the minimum payment on one or more of your cards? If so, begin to do so. You can have large amounts of credit card debt for many reasons but paying it down is pretty easy if you have a plan. Choose a strategy on how to pay off your credit cards fast and stick to it until your debts are paid off.
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How to Pay Off Your Credit Card Fast
Let’s take a look at some different strategies:
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Pay off the card with the highest interest rate first.
This strategy makes the most sense. With this strategy, you increase your payment on your credit card with the highest interest rate and at the same time continue to make the minimum payment on the rest of your credit cards. Once you have paid off the entire debt on the card with the highest interest rate, you move on to the card with the second-highest interest rate, and so on.
Increasing your minimum payment on the card with the highest interest rate is a good way to start. No matter how much you can afford to increase, do it, and stick to it. If you start by paying $1,000 on a credit card, then pay at least $1,000 every month until the debt is paid.
Be sure to stick to your payment even as your debt and minimum payment decrease. Remember: the goal is to get your debt to zero.
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Pay off the card with the lowest debt first
This strategy is a good way to get some momentum. With this strategy, you increase your payment on the credit card payment with the least debt first, while continuing to make the minimum payment on your remaining credit cards. When you have paid off the card with the lowest debt, you go on to the card with the second-lowest debt, and so on.
It is faster and easier to pay a credit card with $5,000 down to zero than a credit card with $ 25,000 and it feels good and increases your chances of success if you can see some early progress. No matter what size of debt you start with, paying off one or two smaller credit cards first will give you more money to focus on the larger debts down the road.
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Consolidate your debt into a single card or loan
Do you like simple methods, then this strategy may be for you. By consolidating your debts into a single card or loan, you have a single payment to make each month instead of four or five. Remember to pay an amount that is much more than the minimum so that you are paying more towards the principal and make some real progress with your total debt.
This payment strategy makes it easy, but it also makes it easy to let things slip so choose a payment amount, double or triple your minimum payment (or what you can afford), and make sure to stick to it.
In summary, these are the steps to follow to end the spiral of card debt:
- Check your cards and change the payment method
The first step to getting out of the debt spiral is to take stock of the situation and prevent the ball from getting bigger. To achieve this you have to:
Find all the credit cards you have. Search your portfolio and also check your online banking. The bank cards associated with each account should appear there. Also, by the movements in the account you will be able to see if other cards are not yours and you may have some fraudulent accounts open in your name.
Review and change the payment method. If you have a card in revolving mode, change the payment method to full payment at the end of the month as long as you can afford it. This will prevent you from being charged interest that can easily exceed 20% for paying only the minimum of the card.
- List your debts: use the waterfall method to end credit card debt
Once you have put your cards in order, it is time to face them. To achieve this, I suggest you to use the waterfall method to end debts. This formula consists of prioritizing the payment of the cards based on the balance you owe or the interest rate. The advantage of focusing on your balance is that you can free your money faster. In doing this you may see a nice improvement in your credit score as well.
- Use your savings to pay off the small debt by making payments upfront whenever possible.
- When you finish paying that debt, use that money that you no longer pay month to month to apply to the next card.
- One way to speed up the process of getting out of card debt is to gain additional liquidity. In other words, make more money or save more. Reviewing your budget can help you achieve this.
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Stay with only one card
Lastly, you have to adjust to your new life away from credit card debt. One way to do this is to exchange your credit cards for a debit card. This will force you to only spend money that you have and not allow you to dig yourself into a hole again. After doing this it is not a bad idea to keep a credit card on hand for emergency payments until you are able to build up an emergency fund of about $2,000 in cash.
If you have a real problem with credit cards and are unable to control you spending it is a good idea to destroy your emergency credit card once you have your emergency fund established. I hope this article was helpful in providing you a strategy for how to pay off your credit cards fast. Good luck in your goal of becoming debt free!
