Have you been paying the minimum payment due on your credit card and leaving the balance to when you have money to settle the full outstanding on your card?
The minimum payment due is an enticing option: to pay a small payment and roll over the rest of the due money to the next month. However, that rolling charge comes back to haunt you in terms of the high interest that you have to pay on the credit card outstanding.
You may have a good reason for having the high-interest debt in the first place – maybe some unexpected expenses, loss of employment or illness. Irrespective of the reasons, eliminating the high-interest debt should be your top financial goal.
At mymoneykarma, we have an action plan to eliminate high interest debt and manage your money well. Here are 4 ways to eliminate your credit card debt.
4 Smart Strategies to Eliminate Your Credit Card Debt
- Start with One Card
In case you have balances on multiple credit cards, it will take some time to eliminate all those debts. Therefore, start with one card at a time and give yourself a pat on the back as you tackle the debt on that card. You can choose the card according to the objective you want to achieve. If you want to “Pay off one card’ then tackle the card with the lowest balance. Alternatively, if you want to boost your credit score, then choose the card with the highest utilization rate (which is equal to your balance divided by the limit of the card).
- Use Balance Transfer Option (cautiously)
It is a tempting idea to move the balance from a card with a high-interest rate to another card that will give you a longer period to pay off the balance in monthly instalments at lower rates (you find one at mymoneykarma). That is a smart move, and you can save a lot of money when you do that. However, you should be careful and transfer the balance only if you intend to pay off the debt within an introductory low-interest-rate window (which typically lasts 12 to 18 months) and to make monthly payments on time. In addition, you should be aware that you’ll probably be charged a balance-transfer fee on the amount transferred.
- Consolidate Your Credit Card Debt
The most preferred option in the ideal world would be for you to pay off your credit card debt. However, your financial position might not allow for that some times. In such a scenario, you should consider consolidating all your credit card debts by taking a personal loan. A personal loan is an unsecured-fixed-rate-loan on which the interest rate is substantially lower than the interest rate you pay on credit cards. Taking this loan to pay off your credit card debts will help you save a lot of interest.
- Pay More than Your Minimum Due Each Month
Credit cards charge interest on a daily basis. The sooner you make the payment, the faster your balance is reduced, and that helps you lower the interest you pay. Therefore, you should consider paying off as much as you can on your budget. This will help you lower the interest that you need to pay. A good way to think about this is in multiples of the minimum amount due, so that you can try and pay twice the amount of minimum amount due and then increase it if your budget permits.
To avoid paying a lot of interest, it is prudent to stay on top of your credit card debt and eliminate it at the earliest.