American credit card debt reached $1.08 trillion at the end of 2019. With the average American household owing $8,398 in credit card debt, it’s easy to see why so many people are eager to understand how to pay off credit card debt in a way that’s quick, easy, and actionable.
Depending on the type of credit card you have, how good you are at budgeting your income and expenses, and the aggressiveness with which you’re interested in paying off your credit card, we’ve got a few tips to help you alleviate this financial stress.
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How to Pay Off Credit Card Debt Faster
1. Set a Budget
The first step in paying off credit card debt faster is getting organized. You can’t possibly begin to think about an aggressive debt repayment strategy if you don’t know how much debt you owe. Sit down, crunch some numbers, and get a solid idea of exactly how much you owe in credit card debt. Make sure you know which cards have the highest interest rates, minimum payments, and everything related to making payments. Then, set a budget with those numbers in mind. Try utilizing a budgeting app that’ll track your credit card statements and payments.
2. Reduce Your Spending
This one seems so simple yet it also seems so hard for many people to stick to. The easiest way to earn extra money to pay off debt is to simply reduce your spending however you can. With your current budget and expenses in mind, go back over the numbers and slash anything that’s not absolutely necessary. This can include small things such as subscription services or larger expenses such as a kid’s summer camp fee or payments for a new car. If it’s not necessary, let it go until you’re done paying off your credit card debt.
3. Choose a Method for Paying Off Debt
There are numerous different debt repayment strategies, with the avalanche and snowball method being the two most popular. When following the debt snowball strategy, you focus on and tackle the smallest debt first. When following the debt avalanche strategy, you focus on paying off the debt with the highest interest rate first. There’s no right answer as to which one might work best for you, it really comes down to your total credit card debt and income. However, paying off the credit card with the highest APR does prevent you from spending so much on interest.
4. Think About Consolidating Debt
Consolidating debt consists of compiling all of your credit card debt into one payment, hopefully at a lower interest rate. While debt consolidation isn’t necessarily a way to reduce the amount of debt owed, it might help you rearrange the debt in a way that makes it easier to pay off. You can look into popular options such as a debt consolidation loan ora 0% interest balance transfer credit card. Depending on which credit card provider you currently have, you can speak to them about their balance transfer credit cards and what your options might be. Regardless, you’ll only be dealing with one credit card payment each month, which makes setting up auto-payments easier.
5. Pay Off Debt with a Personal Loan
Should you pay off credit card debt with a personal loan? It all depends on interest rates. And, right now, interest rates are low. Personal loan interest rates are so low right now that it might make more sense if your credit card debt has higher interest rates. According to the Federal Reserve, for example, borrowers who were charged interest on their credit-card debt paid an average of 16.97% in the third quarter of 2019. However, the average rate on personal loans during that time was 10.07%.
6. Automate Your Debt Payments
If you have a good idea of how much your minimum credit card payments need to be, go ahead and automate your debt payments to that amount. This ensures that you’ll never feel tempted to pay a little less because you want to spend a little more on something extra this month. If the cash is being taken straight out of your account, you’ll be less likely to skip payments. And, whenever you’re able to pay more, do so!
7. Take On a Side Gig
If you’re barely able to make minimum payments on your credit card or are having trouble even paying off the interest then you might simply need to be making more money in order to make higher payments. If you’re truly interested in paying off credit card debt faster, you’ll want to maybe look into a side hustle or gig job. However, the great thing about a side gig, unlike a second job, is that you usually get to control your time. So, if you only want to work weekday evenings, you can. Whether you’re bringing in an extra $100 or $1,000 per month, every dollar helps.
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