Looking to pay off your credit cards and reduce your debt? Following these tips can help you effectively chip away at credit card balances and finally become debt-free.
- Stop using your credit cards. It may be easier said than done, but it works. Credit cards are so simple to use, you can overspend without really thinking about it – and then be lured into not paying off your full balance. So, first step for any credit payoff plan is to stop using your cards for any more purchases.
- Get a realistic fix on your debt. Gather all your credit card information – your online accounts, paper bills, accounting for all the credit and store cards you have. Calculate total balances to see exactly how much debt you have, so you can create an effective plan for paying it all off.
- Begin the month with a budget. Create a budget each month of projected expenses and income. This can reveal any overlooked opportunities to direct more of your income towards debt reduction. It also gives you a sense of how quickly “little things” add up. While it may feel tedious, budgeting can make a big impact on your long-term strategy for eliminating debt.
- Make timely payments. Always send your payments on time. Creditors often penalize late payments with a higher interest rate – meaning more of your payment goes to interest instead of paying down your balance. So whether you’re paying online or through the mail, give your payment plenty of time to get there.
- Make more than minimum payments. If you only make minimum payments each month (which is usually 1–2% of your entire balance), you’ll barely make a dent in your debt and end up paying a lot more money over the long run than you originally spent. Making even double the minimum payment can still put you much further ahead on debt reduction.
- Focus on cards with low balances or higher interest rates first. Some financial experts suggest you pay off credit card debt starting with the smallest balance first. This shows you immediate success and helps create momentum. Other experts recommend paying off credit cards with the highest interest rate first – which saves you money in accrued interest. Either way, the goal is to make strides toward paying off your credit cards. To find out how much you can save by paying down various credit card balances, use a credit card payment calculator.
- Take advantage of low balance transfer offers. If your current credit card company isn’t willing to decrease your interest rate, it’s a good time to find a lender with better rates. Many lenders offer low or even 0% balance transfer offers – a great reason to switch accounts. Our Visa® Credit Card offers 0% interest for the first six months, giving you a time window to pay off or reduce your debt before the introductory period ends and interest kicks in.
- Request rate reductions. While it may seem strange to call your credit card company asking for a lower interest rate, sometimes it actually works. No company wants to lose your business, so certain lenders will lower your interest rate to keep you as a customer. When you call, be polite yet firm – and if they’re unwilling to work with you, simply let them know that you’re considering transferring your balance to another credit card company for a lower rate.
- Consolidate your debt. For homeowners looking to consolidate debt, a home equity loan or line of credit could do more than lower your monthly payments. Using a home equity line of credit could also lower your interest rate, as well as offer potential tax benefits.
Paying off your credit cards is no easy feat. However, it is possible to reduce credit card debt when you make smart choices with your money. Call Nationwide today to learn about low introductory APRs and balance transfer rates.