Credit card debt is something a lot of Americans struggle with in life. According to CNBC, 56 million Americans have been in debt for over a year. Worse yet, half of Americans carry balances on their credit cards monthly. Credit card debt can make it exceedingly difficult to achieve financial goals. You can experience freedom, but it does take work. With a plan you can achieve success, in time. Here are 11 ways you can begin to eliminate your high-interest debt for good.
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Call the Bank
If you’re struggling with your payments, don’t ignore them. Reach out to the issuing bank and let them know what’s going on.
Ask to see if they can reduce your interest rate for a period of time. That has a direct impact on what you will need to repay.
Use the Debt Snowball
Paying off debt is an emotional exercise. Paying off one card, for example, gives you the motivation to continue.
With the debt snowball method, you pay off the smallest debt and then move to the next one. Make the minimum payment on all of your cards, and put all you can at the smallest one. Rinse and repeat to eradicate the debt.
Use the Debt Avalanche
A lot of people love to use the debt snowball. Experts like Dave Ramsey promote it, but it’s not the only option to attack credit card debt.
The debt avalanche is a suitable alternative to the snowball. Instead of focusing on the smallest debt balance, you throw all you can at the highest interest rate card, then pay the minimum on the other cards. The idea is to knock down the principle on the highest interest first to help save you more money.
Neither plan is right or wrong. Select which works best for your situation. What matters is you’re attacking your debt.
Pick Up a Side Hustle
Saving will only take you so far. Earning additional income can be a great way to reduce your debt.
Find a side gig that fits with your schedule, and apply all of your earnings to the indebtedness.
Move to a Balance Transfer Card
One of the biggest problems of credit card debt is the interest rate. If you’re paying 20+ percent on your credit card, consider a balance transfer card.
They allow you to lower your rate to zero percent for up to 18 months. Just make sure you pay it off over that time so you don’t get charged interest for not doing so.
Pause Saving and Investing
Saving and investing are vital parts of financial stability. However, consumer debt is an emergency you must handle.
If you’re saving or investing, great. Consider pausing short-term and applying those funds to your debt. Once you’re back on your feet, you can resume.
Take Out a Personal Loan
A personal loan isn’t always a good option, but it can be if the rate is lower than your credit card. Furthermore, if you’re committed to eliminating debt, it can be a wise choice.
Consider sites like Prosper since you might find a rate lower than at your local bank.
Create A Budget
When I was in debt the first thing I was directed to do was get on a budget. I was scared and needed help, so I was willing to try it.
If you’re new to the idea of budgeting, don’t let it overwhelm you. Write down everything you earn a month, then write down everything you spend. It doesn’t matter how small the amount, you want to identify where you truly stand.
This information will help you make informed decisions of what needs to be cut, or if you need to earn more. And, it allows you to create a plan to move forward with eliminating your indebtedness.
Make Two Payments a Month
Making multiple payments a month may seem overwhelming when you’re in debt. However, it allows you to make what amounts to an extra monthly payment annually.
If possible, try this approach. It will help you eliminate debt faster and save on interest.
Be More Than Minimum
I used to think that making the minimum payment on my credit card debt was a good thing. While it’s better than skipping a payment, it does little to knock down the principal of the debt.
Worse yet, it means you’re paying more interest over the term of the repayment, making it take longer.
Consider Credit Counseling
If all else fails and you don’t know where to start, credit counseling might be a good choice to get your debt under control.
Do your due diligence before selecting a counselor. There are a lot of shady counselors out there, but there are some good ones that can truly help.
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I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.
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