The credit card and the purchasing power that it provides can either be a godsend or a complete curse, depending on how financially savvy you are. For the uninitiated and careless, it could be the latter. Finding yourself buried in a seemingly inescapable hole of credit card debt is as easy as swiping it on a terminal, and you normally do not know that you are already in trouble until you are. With interest rates as little as 15 percent per annum, it’s a problem that’s not at all cheap, indeed. And with interest rates projected to increase even more in 2018, it’s a problem that might never go away.
Luckily, it is never too late to rein in your credit card debt, no matter how uncontrollable it might seem. All you need is the will to start managing it better and making a few adjustments in how you handle your finances. Here are some simple ideas to get you started:
Increase your monthly payment by as little as $10.
This may seem not a lot, especially if you’re just getting by with paying the absolute minimum amount every month, but an extra $10 in payments go a very, very long way. If, for example, you owe about $3,000 with a 20 percent interest rate. Your minimum monthly payment would be along the lines of $150. By paying an extra $10—that is to say, $160 total—you not only save over $50 in interest but also finish paying off your debt approximately two months sooner. As they say, even a little bit goes a long way.
Prioritize and stick to your budget.
Knowing how your money is being spent every month is the very foundation of having a foolproof strategy in eliminating credit card debt. Take the time to analyze your spending, and figure out which areas you can decrease spending in, which you can then add to more worthwhile expenses, like your credit card payments.
Pay off credit cards with the highest interest rates first.
As tempting as it may be to pay off the credit cards with the lowest balances first, it’s actually a better idea to pay off those with higher interest amounts, no matter how long it might seem to finish it off. This is because higher interest rates will make your debt grow exponentially every month, so you really need to shift your payments towards it to curb this rapid growth.
Consider a balance transfer.
Some banks and credit institutions offer balance transfer cards at low to zero-interest for as long as 24 months. By transferring your credit card balance to this option, you can enjoy virtually no interest for that long, which makes it easier for you to catch up and pay off your credit card debt. Plenty of things can happen in two years, after all, and this is one option that really buys you that much time effectively.
Use your rewards points.
Most credit card owners do not really realize that they are sitting on a stockpile of credit card rewards points, which are earned whenever the card is used. Some credit card institutions offer cash backs in exchange for these points, as well as a variety of other rewards. Use this towards shaving off a few dollars of your outstanding balance. It’s bound to make a dent.
It really does not hurt to ask your credit card issuer for a lower interest rate. Some of them offer some sort of amnesty program for customers with high outstanding balances, and you may qualify for those. Hardly anyone ever thinks to ask, though, but apparently, this works about 80 percent of the time. So give it a try!
Go for debt management.
If you’re really serious about decreasing your credit card debt, a credit counselor can help you create a debt management plan. This is especially helpful if your situation is dire. You and your credit counselor will work out a specific amount each month to pay your credit card and other debts. Your credit counselor will then dispense this amount to the recipients you have identified, eliminating the risk of you spending the money on something else. The only downside here is you will be asked to destroy your credit cards so as not to go further into debt.