A Simple Guide to Paying Off Your Credit Cards
The following is presented for informational purposes only and is not intended as legal advice or credit repair.
If you’ve been carrying balances on your credit cards you likely know full well how much that debt has been costing you. Getting rid of that debt, however, doesn’t have to be complex.
If you've been struggling to finally tackle that debt, here are some simple steps to get you started.
Review your situation
First, find out exactly who you owe, how much you owe, and what the interest rate is for each balance. Your monthly credit statements should tell you what you need to know, but you can also request a copy of your credit report as a second source of information.
Compile all of this information to create a full picture of your current debt situation. In many cases, simply wrangling all of your accounts into one place can make the debt feel less scary and more manageable.
Additionally, you may also want to try contacting your credit card companies individually to explain that you're looking for lower rates. In some cases, credit card companies may be able to offer a revised repayment schedule. Don't necessarily count on it, but it's always worth asking, especially if you're experiencing a financial hardship.
Pick a strategy
Once you have the complete picture, decide how you'd like to tackle your debt. You may choose to focus on all of your debts equally, but there may be a smarter strategy available.
Most experts advise that you tackle the cards with the highest interest rates first (in order to save money in the long run). You may instead prefer to focus on the accounts with the lowest balances, in order to build some momentum and see more immediate results. Either way, once you've picked a path, try and stick with it and be consistent.
Pay more than the minimum
While paying the minimum required every month will keep you in good standing with your creditors, it can draw out the debt repayment process substantially.
Because your interest compounds every month, the minimum payment may not be enough to significant lower your balance. Instead of paying only the minimum monthly payment, consider your total budget and try to commit to making larger payments each month. The more you can commit to your credit card debt, the sooner you'll reach your #DebtFreeDate.
Increase income or decrease expenses
Paying more than the minimum due may be a challenge if your budget is already stretched too thin. Given the choice, essentials and necessities should always come before debt payments.
That said, a lingering debt may be the primary reason why your budget is so taxed. Temporarily adding extra income or cutting way back on non-necessities in order to overcome your debt may not be an appealing choice, but it might be what you need to break free from the cycle of debt.
Find the right debt repayment tool for you
Going it alone may work just out fine, but if not, you can always consider using a debt repayment tool to help get you over the hump.
Take a look at all of the available options. See which align best with you goals and circumstances. Just make sure you understand the terms and conditions of your agreement before making a commitment.
Change your behavior
It’s not enough to just get out of debt. Your goal should also be to stay out of debt, at least to the best of your ability. And that may require that you first understand why you got into debt in the first place and what you need to change in order to prevent that from happening again.
Think about how you came to be overburdened with debt:
- Was it caused by an event outside of your control?
- Was it caused slowly, over time, by bad financial habits?
- Could a focus on building savings have helped?
- Is there anything you can do moving forward to put yourself in a better position to avoid debt?
Don't beat yourself up. The point is just to examine what happened and make a conscious effort to change the things that are within your control.
If that sounds daunting, don't worry! We're here to help. Financial counseling from MMI is free and available 24/7, online and over the phone. Connect with us to review your finances and discover the best way to reach your financial goals.