10 Easy Ways To Get Out of Credit Card Debt Fast
It takes time and determination to climb on top of a mountain. The same effort is required to conquer a mountain of debt. Debt may be challenging to pay off especially the credit card one.
Imagine you don’t earn a lot of money, and you are really broke, and on top of that, you are burdened with all kinds of debts.
Well, at this point you may think that you’ve reached your end and there’s no means to tackle your credit card debt, but with the right knowledge and tools, it’ll be easier for you to beat this problem.
In as much as credit cards give one the freedom to spend money that they don’t actually have, they also force them to pay extremely high interest that exceeds the money they are making elsewhere.
Worse is that that interest continues to add up every other day. So it becomes overly difficult and overwhelming to get out of credit card debt.
As of 2018, statistics by Value Penguin revealed that the total amount of credit card debts owned by Americans was over $1.03 trillion, which means an average U.S household carries $5700 in credit card debt.
On an annual basis, the research also found out that $104 billion is paid on interest.
Many reasons force us to take loans. It could be a disaster that needs a fast alternative to fast cash or at times, we just get tired of living from paycheck to paycheck.
No matter the kind of debt you are in, it can take years to repay it. But luckily, there are a few strategies you could use that can make paying off balances faster. Here are 10 easy ways you can get out of credit card debt fast.
Ways to Eliminate Credit Card Debt
The first step towards getting yourself out of this problem is to figure out why you are in it in the first place. It’s also essential that you understand how a credit card works.
You’ll need to find out the compound interest, principal, credit scores and annual percentage rate among others. You’ll also be forced to figure a way to earn more than the minimum payment you are to make for the loan.
If you are struggling with debt, follow these simple steps.
1. Find out How Your Debt Got out of Control
You are in financial trouble, and you need to find the source of your problem. So the first thing to do is to ask yourself how you got to be in debt in the first place.
There could be many reasons that force you to take loans. It could be a series of unfortunate events that caused you to get a loan such as emergency medical expenses or loss of a job. Or it could also be an issue that has been going on where your expenses exceed your income.
Regardless of the reason, it’s wise that you find out why you are in debt so that you can try to fix that. After all, it’s impossible to fix a problem that you are not aware of its cause.
If for example, you often find yourself spending more than what you earn, then you’ll know it’s time you start cutting down on your cost and find other ways to make extra cash. But if the debt was accumulated due to a disaster, then that is normal, you just have to find means to deal with it.
Although this article is for helping you to get out of debt fast, knowing the root cause of your financial woos will come along way. Then you also need to determine how much exactly you owe to credit cards, personal loans, mortgage, etc.
2. Create a Payment Plan
You already know the source of your debt, and how much you owe to your credit card, the next step is to develop a plan on how you’ll pay it off. Dave Ramsey encourages people to use two strategies to repay their loans:
• Debt Snowball
Using this strategy, you’ll concentrate more on paying small balances first but still putting down the minimum payment on other debts.
For instance, let’s say you can only afford to pay $800 per month, using this strategy, you’ll pay $250 minimum payment for Card A and the mortgage loan and use the rest of the money to pay for the balances of Card B.
The advantage of this strategy is that it gives you quick wins, which can encourage you to pay your debts fast.
• Debt Avalanche
Here you’ll put more focus on paying debts with high interest first. Using the same example above, if you can only pay $800 per month; you’ll take $258 minimum payments on Card B and your auto loan while the remaining $542 goes to paying the balance on Card A since it’s your highest annual percentage rate.
If you go with this option, you’ll save a lot of money in the long run. How? The more time you take to pay a debt, the higher the interest will be.
But if you use a short time, then you can save yourself more dollars. However, the only challenge is that you’ll need some motivation to stick to this plan.
Overall, creating an effective plan will ensure that you stay organized and committed to paying your balances.
3. Design a Payment Budget
It’s one thing to develop a plan and another to ensure that you have funds available every month to repay your loans.
A budget will help you to pay the balance and still remain with something to take you through the rest of the month. So, ensure that you list your income and the expenses and allocate a specific amount to loan repayment.
If you have no idea on how to create a budget, you could get help from some useful apps such as Mint and YNAB.
But even as you do that, it’s essential to remember making only the minimum payment isn’t enough. In fact, credit card companies enjoy when you make the minimum payments only because it means they’ll be getting some cash from you every month.
4. Use Cash to Pay Off Your Balances
The mistake many of us make is we pay loans using our credit cards. But, remember it’s very easy to overspend if you use these cards than it is when you have cash.
Credit cards create an illusion that you have money, so it’s okay to spend while in reality that’s not true. However, since closing your credit card accounts can have a negative impact on your credit score, you should instead cut them up, after all, you can always request a new one, or hide them far from your reach.
Make use of the envelopes, where after budgeting for expenses, put the cash in an envelope, this will save you from overspending. It’s essential that you be your own accountant and account for how every dollar was spent. And there’s no easier way to do that than to use cash.
5. Cut Down Your Expenses
Sometimes the reason your balances have accumulated is because you didn’t prioritize your spending. Tracking your expenses is a crucial part of budgeting. And it could be your spending habit that got you into this trouble in the first place.
So you need to find a way to minimize your expenditure and ensure that it’s not more than what you earn. If you are looking for ways you can cut down your expenses and save some money at the end of the month, here are some suggestions.
• Stop eating out and prepare your meals instead
• Find cheaper alternatives to gas, car fuel etc.
• Bike or walk to work
• Exit from unnecessary subscription plans
• Reduce your grocery shopping
• Use online banking to cut down banking fees
• Reduce your energy and water bills
Here are also more ways to cut down your expenses
Ask for a cut
Going out to buy something? You can always negotiate the price and save up some cash. Ask the seller to provide you with a favorable deal to buy that table, couch or TV.
And luckily for U.S citizens, if you are not among the lucky few who were gifted with negotiation skills, some apps could help you negotiate a lower bill on your behalfs, such as Bonus and Trim.
Make use of cash backs when shopping
There are multiple free apps that pay you anytime you shop. This way, you get to earn your cash back. The apps include Ebates, Checkout 51 and Drop.
6. Look for a Side Hustle
If you need to get out of debts fast, then one job is not enough. You need to look for other ways to earn that extra coin. Pick up a side hustle or look for another job that increases your income and commit the money specifically for paying your balances.
There are many side gig jobs you could do, such as tutoring, blogging, freelance writing, driving for Uber, and selling on Amazon. You can also take surveys and generate an extra $50 to $200 per month depending on the company.
However, be sure that the online company is legit. A few examples of reputable online paid survey companies include Survey Junkie, Swagbucks, and Inbox Dollars, among others.
7. Shift to a Low Rate Balance Transfer
Since many financial institutions do give balance cards that have a low introductory rate for a specified time, you should take advantage of that.
If you have a balance transfer card that offers 0% promo rate on a credit card for 12 months, for example, you can save so much on interest especially if you pay all or as much of the principal as you can during this interest-free period.
More often, balance transfer cards come with a transfer fee of between 1%-5%. You should read the fine print to know the exact fee and for how long the interest rate is available so that you begin making plans of paying the principal.
Balance transfer cards in the U.S include Discover It and Bank American Cards while those in Canada include Scoti Value Visa Credit card and Tangerine Money-Back credit card.
8. Pay Your Credit Card Debt with a Personal Loan
If your credit card balance is high, you can consider paying it with personal loans. The interest rate on credit cards might be high, but if you have a good credit score, you qualify for a personal loan with much lower interest.
The advantage of using this strategy is you can pay off several credit card debts and begin focusing on paying a fixed monthly payment of the loan. Also, since the interest rates are lower, you’ll pay less at the same time boosting your credit score.
For those who have stellar credit scores, they are still qualified for a debt consolidation loan, only that they will pay higher interest. If you wish to get a personal loan, consider companies such as Lending Tree and Lendkey among others.
Individuals who have equity in their homes can also apply for the Home Equity Line of Credit (HELOC), which offers lower interest rates since the loan is secured in your home.
Apart from helping to pay your credit card loan faster, a HELOC also saves you much money on the interest. However, you should be careful with this loan because if you end up spending it on other things other than to pay your debt, you can increase your debt burden.
And also, with some providers, the original fee is so expensive, therefore, you might end up paying more in overall interest.
9. Negotiate On the Interest
Many people don’t know this, but they can negotiate with the credit card company to lower the interest and reduce the debt amount. This sounds like a long shot, but it’s worth your try. At the of the day, it can save you much money annually.
10. Make Multiple Payments in a Month
Don’t wait until the end of the month to pay off something. Instead, make small payments, you could pay after 1 or 2 weeks depending on how capable you are.
This will help you pay the loan much faster. And this technique will also improve your credit card score since paying off frequently lowers your credit utilization ratio.
Final Thoughts
Debt does not only affect your credit score, it also affects your health because of the mounting stress and pressure and your relationships too.
The good news is that you can get yourself out of this situation by trying the above ten ways to pay your balances. But even as you do that, remember that settling your debt is a journey that needs patience determination, and self-motivation.
