Have you racked up some credit card debt?
Well, don’t despair! We have 10 simple strategies for paying off your credit cards. If followed, these tips may help you pay off your debt quicker, boost your credit score and save you money.
So, let’s learn more about how to pay off your credit cards.
1. Increase your minimum payment amount
Only paying the minimum amount owed on your card can result in more interest (depending on the credit card you have) and a longer period of debt. If you find it hard to maximise your repayments, consider a 0% balance transfer card or a card with a lower interest rate.
What is a balance transfer card?
A balance transfer card allows you to transfer your existing balance to a new credit card with a lower interest rate. The interest rate is fixed for a period as an ‘introductory offer’, which allows you to plan your repayments around a consistent percentage. When comparing balance transfer cards, look for a long introductory period and a low annual fee.
2. Stop adding more debt to your credit card
As tempting as it might be to use your credit card for your next big purchase, remember that it’s harder to pay off credit card debt at a higher interest rate. Start thinking about purchases in terms of wants and needs. You need food and shelter; you want that new pair of sneakers.
3. Pay off credit cards with higher interest rates first
That way, you’ll gradually end up paying less interest after you’ve paid off the largest portion of your credit card debt. In other words, when the basement is flooding, plug the biggest leak first.
4. Track your credit card spending
Using credit cards to make non-essential purchases can cause your credit card debt to skyrocket. To combat this bad habit, there are several tracking apps available online – or you can always log your expenses into your Microsoft excel budget spreadsheet! Either way, it’ll pay to track what you’re spending your money on and how often.
5. Cap your credit card limit
You can ask your credit card provider to lower your spending limit, which usually takes one to two business days to take effect.
Also, remember that banks aren’t allowed to invite you to increase your credit limit without getting your agreement first. So, if you want them to stop sending you invites, tell them.
6. Don’t use your credit card for emergency payments
Even if you’re cashless just before payday, using your credit card to pay an unplanned expense, or getting a cash advance will only incur additional repayments and potential fees.
The solution? Set up an emergency fund today, it’s easy to open an online savings account that you can access when times get tough. Just add in a nominal amount every time you get paid.
7. Check your spending history every month
Keep your monthly credit card receipts and check them against the charges on your statement. You don’t want to pay for something you didn’t buy! Learn more about credit card security.
8. Consider debt consolidation
Combining all your unpaid debts into one loan, and then paying it off at a lower interest rate, can help you manage your credit card troubles.
If you find yourself struggling to make repayments, this might be the best way to get on top of your debt (depending on your individual circumstances). Typically, this is achieved by taking out a debt consolidation loan and paying it back over a set period.
9. Don’t be in a rush to close a card with an existing balance
You might think it’s an easy way to regain control of your debt. However, closing a card with an existing balance carries more long-term risk than you might imagine – and can reflect negatively on your credit score.
If you must close a credit card account, ensure you pay it off very quickly and submit a written request to close it to your provider.
What is a credit score?
Your credit score is a three-digit number lenders use to help them evaluate risk and determine if they should approve your loan or credit card application. You can request a free credit report (once per year) from a host of online services.
10. Cancel your credit card once you’ve paid it off
Cutting up your credit card might not necessarily signal the end of your cardholder journey. Even if you no longer use the card you’ve paid off, you can still be charged fees or penalties – or even expose yourself to the risk of credit card fraud if someone steals your details.
The solution? Call your provider and tell them you want to close your account or put your request in writing.
There you have it: how to pay off credit cards with 10 simple strategies. Do you need more help? Visit the National Debt Helpline website for helpful information and resources. For answers to frequently asked questions about credit cards, check out Sergei’s Solutions Hub.
