Strategies To Get Out Of Credit Card Debt

Credit cards are immensely popular forms of payment, but for most users, they are also a method of finance. While many credit card holders are able to avoid interest charges by paying their balances in full, most Americans tend to carry a balance. Since credit cards debts are unsecured, their interest rates are higher than other types of loans. Furthermore, cardholders can continue to incur ever increasing amounts of debt when they use their credit card for their daily spending.

Ultimately, most cardholders will realize that paying off their credit cards is one of their most important, and difficult to achieve financial goals. Fortunately, there are some strategies that people have used to successfully retire their credit card debt.

Make A Budget
The first thing that a cardholder in debt should do is to make a budget. Find out how much money their household is earning, and how much it is spending. The goal should be to reduce expenditures and increase earnings while devoting any remaining income to paying down credit card debts. If a person owes money on multiple different credit cards, he or she should start first by paying off the balance with the highest interest rate. Cardholders should always be paying as much as possible each month, never just the minimum balance.

Using Balance Transfers
One option that credit card customers can use to pay off their debts more quickly is a promotional 0% balance transfer offer. There are many cards that feature a 0% introductory finance rate on money borrowed to pay off an existing balance. These offers can range from six months to nearly two years. The only significant drawbacks of these offers are balance transfer fees. These fees are assessed by the bank that is paying off the cardholder’s existing balance and typically amount to 3%-5% of the amount transferred. Occasionally, a 0% no balance transfer fee credit card can be found, but it is generally best to assume these fees will be charged.

Now, even when carrying a balance that is not incurring interest, cardholders are still responsible for regular monthly payments. Also, when using balance transfer promotions, it is always important to create and maintain a budget with the goal of paying of the entire balance before the promotional rate expires.

Limit Ongoing Purchases
When a cardholder is trying to pay off a balance, it is important to curtail new credit card spending. Like digging a hole in sand, continued charges will replace the amount being paid without reducing the overall level of debt. To avoid additional charges, many cardholders who are struggling to pay off their existing purchases will conduct their new transactions in cash. Using cash for new purchases assures that additional interest is not accrued on these expenditures.

Paying off credit card debt is extremely challenging, but by creating a budget, using balance transfer offers, and limiting new charges, cardholders can emerge from their struggle debt free.

About the author