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Pay off your credit card debt faster: a 4-step plan
Posted by Shelly Eweka on posted on Dec. 18, 2017 12:00:00 PM
Credit card debts are like termites—they eat away at your financial foundation. And unfortunately, it’s pretty easy for them to sneak into your life.
I was first exposed to the lure of plastic when I moved into my college dorm. Right there on campus, credit card companies had tables lined up with sign-up forms and brightly colored marketing materials. Though tempted to sign up for all of them, and buy cool stuff that I couldn’t afford, I quickly realized that I didn’t want to spend my hard-earned money on something of no value to me: Interest.
Nowadays, I own a credit card, mainly to earn cash back points—and always with the goal of paying the full balance each month. If that’s also your goal, but you’re not quite there yet, follow these 4 steps:
- Stop using credit cards. It may sound obvious, but credit cards can be so intrinsic to our lives that it often requires willpower to resist their charms. There’s an emotional element to it that brings to mind the first step of the 12-step program—in which you admit your financial life has become unmanageable. Getting rid of your plastic will force you to live within your means. In an act both symbolic and practical, take a pair of scissors and cut up those cards! Use your debit card instead. And if you are considering debt consolidation, be careful not to pay off credit balances with a loan and then fill up new credit cards again.
- Look at other borrowing options. If you have to pay for something you do not have the cash for, research other options. Few things are worth getting into debt for beyond the purchase of a home or getting higher education. You may be eligible for a student loan, for example, where the terms can be more favorable—and the repayments are tax-deductible. Repayments of mortgages and student loans can also contribute to your credit score. Don’t believe the hype; credit cards aren’t the only way to improve a bad credit score.
- Make small sacrifices. This sounds painful but all it involves is taking a highlighter and a printout of last month’s bank activity. What can you cut? What isn’t worth the anxiety of staying in debt? Services like cable can usually be reduced if you shop around, and treats like going to the spa can be put on hold until you earn it—by first paying off your first debt (or at least a significant chunk of it). Putting yourself in a better financial situation by paying off credit cards can help you work toward your financial goals faster.
- Tackle your debt strategically. If you have multiple debts, and their very multiplicity adds to your anxiety, use the amount presently available in your cash flow to pay off smaller balances first, because that’s more manageable and represents a small win for you—an emotional boost. A more rational strategy is to first pay the minimum payment on everything and use excess cash flow to pay extra on the credit card with the highest interest rate—and then work your way down the interest rate list.
Remember, paying off your credit card debt will help make your financial foundation strong again. If you are able to take these four simple steps, your existing debts can be eliminated one by one—and perhaps even sooner than you hoped.
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