With the new school year underway and cooler days approaching, now is a great time to take charge of your finances. Paying down credit card debt before the holiday season can help you enjoy a healthier, stress-free fall and winter.
To tackle your credit card debt, follow these steps:
Lock Your Credit Cards Away
While this is meant figuratively, putting your credit cards away for safekeeping and deleting any card info you have saved for online shopping can help you avoid temptation. Meanwhile, creating a budget will help you put money aside each month for additional spending and toward credit card repayment.
Pay Extra, Save Interest
No matter what, you should always pay the minimum payment on all your cards each month. But if possible, try paying more. This will help you pay down your credit card debt faster and save on accruing even more interest.
Use a Repayment Strategy
Try using the debt snowball or debt avalanche repayment strategies. Both methods can be equally effective, but you should choose one based on what works for you.
The debt snowball works by making minimum payments on every card, except the one with the lowest balance. Put any extra money toward that card until it’s fully paid off. Then, focus on the next lowest balance, continuing the process until all debts are cleared.
Similarly, the debt avalanche utilizes the same sort of idea. Instead of focusing on the card with the lowest balance, however, you pay more on the card with the highest interest rate, paying more on it until it’s paid off, and then repeating the process with the next high-interest-rate card.
Enroll in a Debt Management Plan
A debt management plan is a program you can enroll in through a certified credit counseling agency. A credit counselor will work with your creditors to reduce your interest rate and consolidate your credit cards into one affordable monthly payment, allowing you to pay off your debt in three to five years.
Not Recommended? Debt Settlement
Debt settlement companies might appear helpful, but they often create more problems than they solve. Many will advise you to stop making payments while they negotiate with lenders, which can damage your credit score and trigger late fees. They also often charge high costs. A better approach is to follow the strategies above, keep your credit in good standing, and make steady progress toward repayment.