Did you know that the average person has around $6,354 in credit card debt? To some, that amount may seem small and to others that amount seems huge. What’s the best way to not fall into this statistic?
Answer: Watch your spending and pay off your credit card debt.
1. Start by Paying Off the Balance with the Highest APR
Tackling credit card debt can be confusing and frustrating, especially when you don’t know where to start. We recommend looking at all of your balances and the interest rates associated with each of them. Shift your focus to paying off the highest annual percentage rate (APR). While focusing on that specific card, make sure you are still paying off the minimum on your other cards. Once you get that card paid off, repeat the system and move to the next card with the highest APR.
This strategy makes sense because it cuts out the spending on interest. To implement this strategy, boost the payments on the card you’re trying to pay off. Make sure you are choosing an amount that you can afford and stay with it.
2. Pay Off the Lowest Balance
When looking at all of your cards, select the one with the lowest balance. This is a great way to build some momentum and see your hard work pay off sooner. When implementing this approach, you increase your payment on the credit card with the lowest balance, while continuing to make all of your other payments. Once the card with the lowest balance is paid off, move to the next. Keep the snowball effect rolling!
It makes much more sense that you pay a $300 balance off before the $1,500 balance. It also feels rewarding to pay a credit card off in full, no matter the amount. Additionally, every low balance you pay in full is one less payment you have to deal with each month. After you pay off your smaller balances, you’ll be able to tackle those larger debts.
3. Consolidate to a Single Loan or Debt
Do you like things made simple? Well, you’re in luck! This strategy may be the perfect fit for you. When you consolidate your credit card debt to one card or loan, you’ll be left with one payment each month rather than worrying about four or five. We suggest automating your payments so it’s always paid right on time.
4. Make Your Budget Work
There are many tips out there for paying off credit card debt, one of the most important things is to make sure you’re not spending more than you make. This is easily one of the most common problems most have with credit card debt. By creating a budget that meets your needs will only help to find more money that you can use towards your credit card debt. Whether you use a tracking app on your phone or do it the old-fashioned way with a paper and pencil, it’s helpful to know your income and expenses. As long as it works for you and your lifestyle, any realistic budget can be a great way to help cut that debt down.
5. Set Realistic Goals
Everyone wants to get out of debt as soon as possible, but the key to this is to be realistic. It’s important to be realistic about what you can do and how fast that can be done. Here are some common questions we’ve heard:
- How can I pay my credit cards off faster?
- Put as much money down as you can each month. The more you can pay above the minimum, the faster you’ll be out of debt.
- How can I pay off $6,000 in debt fast?
- If you have a savings account and can afford to tap into it that will help move things along quicker. Some other things you can look into are selling a second car or things from your home.
- Can I get out of debt without paying?
- The only way to get out of debt is to pay it off or file for specific bankruptcies.
Having high balances on your credit cards can be bad for your credit score. Payment history is the biggest influence on your score, but the second biggest is the amount of debt you’re using. You need to look at the debt you have compared to your credit limit because this will also weigh on your score.
Credit card debt can build up for many reasons. Paying it down or off can be pretty straightforward, you just need to have a plan in place. Find a strategy that works for you and stick with it until your balances are paid off.
Want to talk about your credit card debt and the possibility of getting a mortgage? Call Mid America Mortgage and we’ll talk about all of your options!