Are you stuck in a cycle of minimum payments? Maybe you want to pay off your credit card debt but aren’t sure where to start. I get it. My husband and I have been paying off a mountain of credit card debt. It can be draining when the numbers are so big. It seems like you’ll never get to the other side of the debt.
I promise, if you make the sacrifices now, you’ll be able to pay off your credit card debt and become debt-free. I want to share 5 simple ways to pay off credit card debt with you to help you on this journey to financial freedom.
With credit card interest rates hovering over 20% it can feel like you are not making any progress month over month. It may even seem like you are slipping backward because of the added interest. By following these tips to pay off credit card debt you’ll start making progress again and reach your goals sooner.
5 Simple Ways to Pay Off Credit Card Debt
It is not easy to pay off credit card debt. You will need to make sacrifices and be willing to change your lifestyle to achieve the ultimate goal of financial freedom. However, if you follow these 5 simple tips you’ll pay off more credit card debt this year.
Tip #1 to Pay Off Credit Card Debt: Create a Family Budget
The best way to get started on your journey to pay off credit card debt is to create a family budget. You need to have an understanding of how much money you bring in every month and how much money you have going out.
By creating a budget you’ll also see where you can cut back with your expenses. This is essential to pay off credit card debt. You will want to free up as much extra money as possible to pay off your debt.
The best place to start looking at cutting expenses is transportation and food. These are normally the two places that we overspend.
With transportation, we tend to have high car payments that can be eliminated by selling the vehicle or downsizing. You can also look at your fuel consumption to see if there are ways you can cut back how much you are driving. This may mean doing all of your errands in one day or even looking for a fuel-friendly vehicle.
In regards to food, you may need to menu plan each week so you are eating at home. Cut back on the fast food and restaurant expenses each month and even pack your lunch for work. These simple changes in your food consumption can have a huge impact on your budget.
If you are brand new to budgeting that is okay. By creating a written budget you’ll be able to see exactly what you are earning and spending each month to make informed decisions about your buying patterns. You can learn more about budgeting from the two articles listed below and by downloading my free budget worksheet.
Tip #2 to Pay Off Credit Card Debt: Stop Using Your Cards
This may sound easier said than done. I know it can be difficult to stop using your credit cards but it is essential if you want to pay off credit card debt.
When you start budgeting and paying cash for your purchases you’ll have a better grasp on how much money you are actually spending each month. When you physically hand someone money you feel the transaction.
You don’t feel the transaction when you swipe a card. When you swipe your credit card you may not even know how much the purchase was. Think back to the last time you used your card – what did you buy and how much did you spend? You probably don’t know the answer to that question. It’s okay. We are here to change that now.
There are two things you can do with your credit cards – cut them up or lock them up. If you are truly trying to break free from credit cards then I recommend cutting them up. This way you are not tempted to use them again and you can start living a credit card free life.
Tip #3 to Pay Off Credit Card Debt: Find a Debt Payoff Strategy
To pay off your credit card debt quickly you will need a debt payoff strategy. There are two main contenders when paying off debt. You have the debt snowball and the debt avalanche.
The debt snowball strategy is when you list all of your debt in order from lowest balance to highest balance. You then pay the minimums on every debt except the smallest balance. When that debt is paid off you move onto the next smallest debt and roll the minimum payment from the previous balance into this credit card debt. You can learn more about the debt snowball here:
The debt avalanche method is when you list all of your debt in order from highest interest rate to the lowest interest rate. You pay off the highest interest rate loan first and then move down the line. You can learn more about the debt avalanche here:
There is no right or wrong answer to which method you should use. The debt snowball is effective because it gives you small wins early on in your journey. The debt avalanche is effective because you’ll save more money in interest. The decision is ultimately yours and what will work best for your family.
Tip #4 to Pay Off Credit Card Debt: Transfer Your Debt
We just talked about the methods used to get out of debt. However, there is another method you can use that may help you get out of debt faster. If you have numerous credit cards with very high-interest rates it may be worth your time to look into balance transfers.
These balance transfers normally come with a balance transfer fee but much lower interest rates. You will need to run the numbers but if you can transfer a high-interest card to a really low-interest card it may save you thousands. Just remember, these transfers are normally good for a set period of time (6 months, 12 months, 18 months) so you will need to ensure the card is paid off before then.
A balance transfer is not right for everyone. Normally, they are not recommended as a way to get out of debt because you feel like you have done something when all you have done is moved the debt around. The transfers are beneficial when you have really high-interest rates and a plan to pay off the transfer before it expires.
Tip #5 to Pay Off Credit Card Debt: Automate Your Bills
Have you ever had a late fee because you missed a payment by 1 day?! It happens, a lot. It also costs us thousands of dollars per year in late fees that are pure profit for the banks. The best way to combat this is to automate your bills.
If you have your budget under control (go back to tip #1) and you are comfortable with the amount of money in your bank account on a given week then it is time to automate your bills.
There are two ways to do this – set up recurring payments through your bank’s bill pay system or set up recurring payments through the company itself.
We have all of our bills automated through the company itself. This ensures that if a due date or an amount changes we will never miss a payment.
You can still make extra payments on your debts even if they are automated. You can do so through the companies website or even your own bank’s bill pay by scheduling a second payment to be made. Watch the extra payment closely though. Some banks will try to pay ahead on your account rather than putting the extra toward principle
You Can Pay Off Credit Card Debt Easily
When you are ready to improve your finances one of the best places to start is by paying off your credit card debt. You can easily automate your payments after your budget is made to help ensure that you never have a late fee again. Cut back any unnecessary expenses to increase the amount of money going toward your debts. Stop using your cards so you do not add to the debt you already have.
The biggest thing you need to do to pay off credit card debt is to pay more than the minimum payment. If you continue to make only the minimum payments you will stay in debt. It will cost you thousands of dollars in interest before the card is ever paid off.