Getting your credit card down to a zero balance is possible – if you know how to do it.
According to NerdWallet’s 2019 American Household Credit Card Debt Study, the average U.S. household carried just shy of $7,000 in revolving credit card debt and paid approximately $1,200 in interest. But depending on your circumstances, credit card debt of even a few hundred dollars can leave you feeling like you’re struggling.
Paying off your debt is critical for helping boost your credit score, freeing up money for things you need, and for saving and providing much-needed financial peace of mind.
But all too often, paying off debt feels like an uphill battle. With a few practical principles and approaches, you can ditch the credit card debt and stop worrying for good.
3 Ways to Eliminate Credit Card Debt
1. List your credit card debt by interest rate
If you have multiple credit cards with outstanding balances, paying them off may feel like attempting to walk a tightrope.
Editor Charis Brown, writing for consumer finance expert Clark Howard’s Clark.com, explained the idea of compiling a list of debts that ranks interest rates from highest to lowest.
Because unpaid credit card debt compounds debt through monthly interest, a smart play for getting closer to the light at the end of the tunnel is eliminating the debts that make you pay the most in interest first and working your way down to those with lower rates.
2. Start small and work your way up
A similar approach to eliminating credit card debt is the “snowball method.”
As contributor Geoff Williams writes in an article from U.S. News & World Report, this approach starts by paying off smaller debts before working your way up to larger debts, irrespective of their interest rates.
According to Williams, this is “a psychological approach rather than the most mathematically efficient method.” By knocking off chunks of your debt and consolidating the number of payments you have to make on a monthly basis, you can steer your focus as you pursue a debt-free life.
3. Keep your balance low
One of the advantages of having a credit card is that it helps you build good credit, which can eventually be used to fund your dreams. But for it to achieve that, you have to use it responsibly, which means more than making your payments on time and even paying them off.
Danielle Wiener-Bronner of CNN Money suggests keeping your credit card balance at or below 30 percent of your total credit line. For example, if you have a $6,500 credit line, you should try not to allow your balance to exceed $1,950 — doing so can cause your credit score to take a hit.
By creating a second, lower credit debt ceiling for yourself, you can help prevent your balances from getting too far out of hand and minimize the amount of interest you will have to pay month to month.
Getting your credit card debt under control may seem like an insurmountable task, but it is not only achievable, it’s also a fairly straightforward goal. By keeping your balance low, chipping away at and eliminating outstanding debt, keeping your spending in check, and using the money you save to build up personal savings, you can break the cycle of ever-swelling debt.
Published by Minster Bank
Includes copyrighted material of IMakeNews, Inc. and its suppliers.