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Debt Free: Strategies to Pay off Credit Card Debt

by Money Team
31 Jul 2017 | 2:10 PM

Excessive debt can wear down even the toughest guy. While there are tried-and-tested methods to keep out of it, staying committed to your financial goal is what matters most. As debt payment is usually a long and uphill battle, only those with enough focus, determination, and patience can succeed.

Here are a few a few ways to pay off your credit card debt:

The Snowball Method
This method involves paying debts from the smallest to the largest, regardless of the interest rates. The snowball method aims to focus on one debt at a time. To accomplish this, list all your debts starting with the smallest balance. Do not mind the terms or interest rates unless two debts have similar payoffs.
 

 

When you start knocking off smaller debts, you can see quick results to keep you motivated. Make sure to focus your attention and keep stepping up to the next larger bill. According to Dave Ramsey, a proponent of this strategy, the snowball method can work well for every type of consumer.

Paying the Most Expensive Balance
The credit card account with the highest interest rate damages your record the most. If numbers motivate you, it is best to pay your debt with the highest balance. If your account uses more than 30 percent of the credit line, you can pay that first to lower your debt utilization.

This strategy requires you to be focused on sticking to a strict payment plan. Through this method, you will end up paying the least amount of interest and become debt-free the fastest.

Consider Balance Transfers
This strategy can be a good way to slow down and take a stock of your debt. A credit card that features a low or no-interest introductory period of debt transferred to another credit card can help you take off a large credit balance over time.

In using balance transfer, you need to be committed to paying off your balance in a timely manner. If you do it without an action plan, it could be just a waste of time. Experts recommend dividing your credit by the number of month of which the zero or low interest rate applies and set a budget for your monthly payment.

Use Savings for Debt Reduction
If your debt seems overwhelming, you may consider using your savings. Do not drain completely, however; it is still better to have an emergency fund if something unfortunate happens. You wouldn't want to put yourself in a situation where you have to ask for money for emergency purposes.

Don't Move Your Debt Around
While moving your debt seems like a quick-fix debt solution, it can sometimes hurt your situation more. When you move your credit card balance, it is easy to believe that you've done something to solve your problem. More so, opening a new credit card reduces the average age of your account, which can reduce your credit score.

Keep in mind that if you plan to apply for any type of loan, opening a new credit card will negatively affect your credit score in the short term.

Choose a debt reduction strategy that motivates you most. Once you finally become debt free, try to monitor your finances. Start building an emergency fund that can cover up to six months of expenses.