Many of us carry balances on more than one credit card. While everyone wants to pay off their credit card debt, not everyone understands how to do it. First of all, stop adding to your debt. Do not charge anything. Use your debit card instead, and if you can’t afford something, just say NO! If an emergency comes up, consider buying at a store that offers free financing. If your refrigerator suddenly dies, try visiting a couple of stores that offer 12 months same as cash financing. Set up automatic monthly payments and make sure that the balance is paid off within 12 months. Otherwise, you will be paying interest from day one, and it will be a huge amount.
The first step to take when paying off your credit card debt is to gather your most recent statements. Make a list of the current balances and interest rates. Now, figure out how much you can afford pay each month. Do not be unrealistic. (This is where a budget comes in handy. You can subscribe to our newsletter and receive a free budget planner.) You should make extra payments toward the cards with the highest interest rates. Most people try to pay off the lowest balance first. While this might give you a sense of accomplishment, it is probably not the best way to go. For example, you have credit card with balance of $1000, with an interest rate of 10%. You might assume that you can pay off this balance in 10 payments of $100. Most people forget how nasty compound interest can be. In this example, you would have to pay $104.64, or forty dollars extra, because of the interest. This doesn’t sound like much, but if you have higher balances or higher interest rates, this can really add up!! You can find a free credit card calculator online. You can then see how long it will take to pay off each balance. You can adjust the number of payments to make your monthly payments fit your budget. This way you can stay in control.
Another thing that you might want to consider is debt consolidation. You can occasionally find a card that is offering no transfer fees and no interest for a short period of time. This may work if you can pay off the balances within the allotted time. Also, most people feel comfortable making the minimum monthly payments. After all, that is the amount that the statement is telling you to pay, right? It’s a big mistake which can cause you to pay thousands of extra interest.
Keep your focus of the highest rate card, and attack that balance with all of your might. Then move onto the next card. Make sure that you do continue to make the minimum payments on the other cards sot hat your credit score isn’t affected. You’ll be surprised at how much better you will feel once you are in control!