Is there anything as worrying as having debts to pay? Of course, there are, but being weighed down by debts is a problem that requires an immediate solution. What can you do when you are in such a situation? The simple answer will be to pay off the bills. Even so, things usually don’t work like that, and sometimes, it takes more than that.
For instance, some of us who have fallen victims to credit card debt know how tough it can be. If you’re in that state or ever find yourself in it, this blog has the best advice for clearing credit card debt.
Settle On Which Card Debt to Clear First
Where is the heavyweight? Pay off the highest-interest-rate card first. It’s the fastest way to clear your credit card debt. Invest more money each month into paying off this card and reduce monthly interest fees. Once done with it, start applying for additional cash to the next card with the highest rate and continue paying the minimums on the remaining ones.
Every time you clear a card debt, a little more cash will remain that you can use to do so for the next ones until you finish paying off all their debt. You can learn the basic strategies on how to settle credit card debt by checking Loan Advisor.
If you plan to clear a single credit card debt faster, attacking the one with the lowest balance first will suffice. To boost your credit score, paying off the highest-utilization-rate card first will be a wise choice. The utilization rate is the total card balances divided by credit limits; the lower it is, the better the credit score.
Do A Balance Transfer
One of the effective ways and the best advice to clear off a credit card bill is to do a balance transfer. This involves using another card to offset the debt in your current card. If your credit score is good, usually 690, and more, you can transfer your balance to a new credit card with a 0% initial rate and a grace period of about 12 to 18 months.
The trick behind this strategy is that you get all your balance moved from a card with a very high-interest rate to one with a low-interest rate like the new one with a 0% interest rate. That enables you to have the chance to reduce the bad debt faster during the interest-free period if possible. Such transfers only take place between different card issuers.
Make Minimum Double Payments Every Month
The credit card interest isn’t calculated from the amount you owe on the due date or close of a billing period. Instead, it is based on the average daily balance carried from one month to the next. Thus, it’s advisable to make smaller payments often to lower the interest amount you might owe. Splitting the payment into two monthlies can help accomplish that.
You are making minimum double payments each month and can enhance the debt clearance rate and see you off it quickly. Every time you pay, the average daily balance decreases, resulting in lower interest charges. This way, you can pay off your debt much faster and improve the credit score; you’ll also enjoy more savings if you do this for more months.
Request for Lower Interest Rates
With an outstanding credit score, you can ask the creditor to give you a reduced interest rate. Those who do so tend to find it easy to combat their card debt without much hassle. Why would doing that help? Because reduced rates can mean reduced monthly payments and charges such that each payment will be more of the principal. Ensure you reach out to your creditor and ask for this option to help clear your credit card debt.
Get Organized and Create a Budget
Sometimes it’s necessary to go back to the drawing table and plan to handle the credit card debts. Organize your cards to know which ones you’ve got, how much debt is on each, and the overall debt amount you need to pay. Then, roll out a strategy to clear it; it’s quite hard to solve a problem that you don’t know about.
Creating a budget with details on what you spend and how much is key to tackling the credit card debt issue. Now is the time to reduce your spending and cut off anything that consumes money unnecessarily. Find out how you can save money and use that extra cash to pay off the credit card debt even faster.
Don’t Use the Card and Don’t Close It Too.
Whether you have one or more cards with debts, a better way to eradicate the credit card debt is to stop using it. Try and use cash payment to reduce the spending on cards. According to research, people tend to pay twice more for a product when using credit card payments instead of cash. So, if you’re striving to pay off the credit card debt, avoid using it to help achieve your goal.
What if you’ve finished paying off the card debt? Is it proper to close it? Not really; that’s not the best way to go. It would help if you still had it to boost the credit score, which depends on your credit utilization rate (the credit amount you’re using versus the overall amount of credit in your name). The moment the card is closed, you’ll have less credit in your name. The debt utilization ratio will increase, and that can be damaging to you. Finally, keeping your card open even after paying off its debt is essential to retaining a long-length credit history.
The Bottom Line
If you seek financial advice, one fact will remain constant- debt-payment isn’t easy. If you ever fall victim to credit card debt; knowing how to solve it is vital. It makes more sense doing something you have an idea about. Paying off your debt also requires that you understand what it takes to do so. Hopefully, this blog will help you to clear your credit card by following its advice.