The truth is that credit cards have become synonymous with our daily lives. Most people use them to pay for almost everything, including their holiday expenses. If managed properly, they are a good financial tool that can help you build credit and earn a wide range of valuable perks such as purchase protection and insurance.
However, carrying a balance can be catastrophic. Credit card is usually a high-interest debt that can easily get out of hand. Even a small balance can quickly spiral out of control, throwing you into a big mess.
So, if you are currently struggling with credit card debt, we are here to offer you some help. This post outlines the top five tips to help you pay off your credit card debt faster.
Target One Debt at a Time
Are you carrying a balance on more than one credit card? If so, there is a high probability that you are always making the minimum payment on each card. While this might seem like a good thing to do, it is never a good strategy for the long term.
Instead of making a minimum payment on each card, focus on paying down the balance on one card as fast as possible. You can choose to pay off the card with the highest interest first or go for that with the smallest balance first.
Either way, your primary concern should be to handle one debt at a time. Doing this will help you avoid taking out a personal loan to help you continue making a minimum payment on every card debt you owe.
Stop Using the Cards for Sometime
This might be hard to do, but it is one of the best ways to get out of credit card debt faster. Freeze all your cards until you manage to pay off all your outstanding balances. That means taking them out of your wallet, so you are not tempted to swipe them.
Paying for your shopping with cash instead of credit cards will help you separate your wants from needs and remain conscious about your spending. Once your debt is fully paid, stick to only one card to avoid sliding back to where you have come from.
Increase Your Monthly Payment
Typically, the less you pay towards your credit card debt balances every month, the longer it will take to settle it. With time, the interest charged on the balances can rise exponentially, making it even harder to pay off the debt.
By increasing your monthly payments, you reduce the balance that is subject to the interest. You should only make a minimum payment if you already have a repayment strategy that requires you to make a significantly bigger payment on one of your other cards.
Examine Your Spending Habits
If you are struggling with a high credit card debt, it means that you did something wrong and the best way to rectify your mistake is by understanding it. The first thing you need to do is look at your expenditures and balance your budget.
If you cannot account for 100% of your expenditures, it means you are doing something wrong. Closely look at your budget and whip off anything that you think doesn’t deserve to be there. Knowing how you accumulated your credit card debt helps you build a strong strategy against future financial shortcomings.
Grow Your Emergency Fund
If you are among the many Canadians who don’t have significant savings, falling into credit card debt can be so easy, especially if you cannot borrow from friends and family when faced with an emergency.
Before you start concentrating on your debt, build your emergency fund. You can start by setting aside at least $1,000 while making only the minimum payment to your existing credit card debt.
That way, you can always tap into your savings instead of swiping your credit card when faced with an unexpected expense.