A Critical Look at How to Pay Off Credit Card Debt Fast
Credit card debt is something most Americans have in common. In fact, about 55% of people who have a credit card also have debt. That makes paying off credit card debt an important issue for a lot of people.
At Addition Financial, one of the most common questions we get from our members is how to pay off credit card debt fast. They recognize that credit card debt can be a problem going forward, and they need guidance about the best way to pay it down.
We’re happy to help. So, let’s take a critical look at how to pay off credit card debt fast – without leaving yourself further financially strapped.
Avoid Accruing Additional Debt
The first thing to do if you have credit card debt you want to pay off is to stop the financial bleeding. That means putting your credit cards away – or even cutting them up – to avoid adding to your existing debt.
We understand that’s a hard thing to do but it’s an essential one if you want to pay off your debt. An alternative would be to pick one card to use and decide that you’ll pay it in full each month. That way, you can have the convenience of a credit card without adding to your debt. But, only choose this option if you know you’ll stick to it.
Analyze Your Debt
The next thing you’ll need to do is to get a complete snapshot of your debt situation. That may mean using a financial app or creating a spreadsheet.
You’ll need to know:
How many credit cards you have
What the balances are
What the interest rates are
What the minimum monthly payments are
It’s important to have this information handy as you plan a strategy to pay off your credit card debt.
Consider Your Feelings
Once you have a handle on your debt, it’s important to take a step back and consider how you feel about it. That might sound strange, but it’s essential if you want to pay off debt quickly.
Look at your list of credit cards and ask yourself:
Which credit card stresses me out the most? Is it the one with the biggest balance? The one with the highest interest rate?
If you’ve got more than one credit card, ask yourself if having fewer cards on your list of debts would make you feel better.
Likewise, ask yourself how you’d feel about sacrificing certain things (say, your weekly take-out order or lunch out with coworkers) to pay off your debt.
Finally, take a big picture view and think about how the debt makes you feel in general. Do you feel sad? Overwhelmed? Ashamed?
Understanding your emotions can help you make a debt repayment plan that won’t add to your stress.
Consider Your Budget
How much debt will your budget allow you to repay each month? That’s a big question and an important one.
If you don’t already have a household budget, this is a great time to make one using our free monthly budget calculator. Even trimming 5% from a few key categories can give you the money you need to pay off your credit cards.
Choose a Strategy to Pay Off Your Credit Card Debt
The final step is to choose a strategy to pay off your credit card debt fast. The work you’ve already done will help you choose a strategy that’s suited to your needs.
For example, if you’re someone who’s stressed out because you’ve got five credit cards on your list, you may benefit from paying off the cards with the lowest balances as quickly as possible to reduce your perception of your debt.
This is sometimes referred to as a “snowball” strategy where you work your way up a list of debts. As you pay off each smaller balance, you should roll the minimum monthly payment for that card into paying off the next highest balance.
If interest rates are your biggest source of stress, then an alternative is to adopt the avalanche strategy. It involves starting with the card with the highest interest rate and paying it off first while still making minimum monthly payments on the other cards. When you’ve paid it off, you’ll roll the minimum monthly payment into paying off the next highest interest rate – and so on.
A third potential strategy is to look for ways to trim your budget and then put your savings toward one or more of your cards. (Look at the savings as a payment you’ll make above and beyond the minimum monthly payment.)
Finally, you may want to consider consolidating your credit card debt onto a card or loan with a low interest rate. This strategy makes it easy to keep track of payments and saves you money on interest.
To evaluate how long it’ll take to pay off your credit card debt, you can use Addition Financial’s free calculator, here.
If you want to pay off credit card debt fast, you should gather information, evaluate your feelings and take various payoff strategies into consideration. Then, you’ll be in a position to choose the strategy that works best for you.
Click here to learn how rolling your existing debt onto an Addition Financial low interest rate credit card can help you save money and pay off your credit card debt quickly.