Credit cards are convenient, easy to use, and offer many rewards, such as travel points and cash back on purchases. But with inflation still running high, Americans are increasingly relying on credit cards to break even. In fact, 46 percent of credit card holders in the United States have credit card debt on a month-to-month basis.
Although credit cards come with attractive benefits, they can also become a stressful cycle of debt if you can’t pay off your balance each month. Every time your balance rolls over to the next month, you owe interest on it. And interest can add up quickly.
If you want to get out of your credit card debt, you came to the right place. We’ve put together a list of tips and advice to help you pay off your credit cards faster.
- Credit cards offer many benefits. However, you risk getting into a costly cycle of credit card debt if you don’t pay off your balance each month.
- Many financial experts recommend paying off credit cards one by one. Making larger payments each month will help you get out of debt faster.
- Credit cards often come with higher interest rates than loans. This can make it difficult to pay off credit cards. Consolidating your debts with a balance transfer credit card or personal loan can be ways to reduce the interest you owe.
This is what we are going to explain:
- Why is it so difficult to pay off credit card debt?
- Pay off one card at a time
- Choose a strategy
- Reduce your expenses
- Consolidate your debts
Why is it so difficult to pay off credit card debt?
Compared to other types of debt, credit card debt is especially difficult to pay off. That’s partly because credit cards typically have higher interest rates than loans.
What is interest rate and what is interest?
The interest rate it is a percentage of the total amount that you borrowed that you pay for the fact of borrowing. This fee is paid in addition to the original amount you borrowed. That extra money you pay is called interest.
If you pay off your credit card balance in full each month, you don’t need to worry about interest. But if you have a balance that carries over to the next month, you’re going to start paying interest on every dollar you owe. This unpaid balance is called revolving debt. When your revolving debt and interest add up, it becomes more and more difficult to pay off your credit card debt.
Here are some tips and suggestions to pay off your credit cards quickly and strategically.
Pay off one card at a time
The average credit card holder in the United States has four different credit cards. If you owe money on multiple credit cards, financial experts suggest paying them off one by one.
To do this, start by listing all of your credit cards, their interest rates, and the amount you owe on each card. Continue to make the minimum monthly payments on all of your credit cards, but at the same time, put any extra money you can on one of the credit cards in order to pay it off. Once it’s paid off in full, you can do the same with the next credit card on your list.
Choose a strategy
How to decide which card to liquidate first? Here are two strategies you may like to consider.
avalanche strategy
With this method, you make your list according to interest rates. Start by paying off the credit card with the highest interest rate. When that balance is paid off in full, you move on to the card with the second highest interest rate, and so on. This is the cheapest method, because it allows you to save on interest while you finish paying off your credit card balances.
The snowball strategy
With this method, you make your list according to what you owe. Begin by paying off the credit card with the lowest balance. This can help when you feel discouraged because you can’t get out of debt fast. When the first card is paid off, that sense of accomplishment can keep you going until you’re fully out of debt. Every time you delete a card from your list, you feel one step closer to your goal.
Reduce your expenses
If you owe a lot of money on your credit cards, paying off the debt can take a long time. One way to speed up the process is to make larger payments each month.
But maybe you’re already having trouble covering your expenses. Between paying rent, high prices at the grocery store, and everything else you have to pay, where do you find money in your budget to make bigger payments? By making small changes to your lifestyle, you can find extra money to help you get out of debt faster. Here are some easy ways to reduce your monthly costs:
- Use coupons at grocery stores
- When possible, use the bicycle instead of driving
- Buy only what you really need
- Eat at restaurants less often
- Pause the services of your subscriptions
You can probably think of other simple ways to cut your expenses. Every dollar you save on spending can go toward your credit card payments.
Consolidate your debts
You may find it easier to pay off your credit cards if you put all your debts in one account. This is called debt consolidation. One of the main benefits of debt consolidation is that you only have to make one payment each month.
Here are two ways you can consolidate your debts:
Balance Transfer Credit Cards
A balance transfer credit card is a popular choice for debt consolidation. Most balance transfer credit cards offer an introductory period where you pay no interest. By transferring your entire debt to this card, you have the advantage of not paying any interest during this period.
If you can pay off your debt in full during this introductory period, you won’t owe any interest. If at the end of the introductory period you still owe, you will have to start paying interest again. So before you decide to open a balance transfer credit card, make sure this is an option you can afford.
Debt Consolidation Loans
Another way to consolidate your debts is by asking for a loan. Personal loans are a common type of debt consolidation loan.
These loans offer several benefits, starting with the fact that personal loans often have lower interest rates than credit cards. By transferring your debt from a high-interest credit card to a lower-interest personal loan, you’ll end up paying less in interest. This saves you money and helps you get out of debt faster.
Oportun: Affordable loan options designed with you in mind
Now that you know how to pay off your credit card debt, you’ll like to know how Oportun can help you if you’re looking for affordable credit options. Visit our website for more information on:
- Personal loans
- Secured Personal Loans
- Credit cards
- Savings
- Investments
- And much more!
Fuentes:
CNBC. Americans lean more on credit cards as expenses stay high: 46% of cardholders now carry debt from month to month. Americans rely more on credit cards as spending continues to rise: 46% of cardholders have debt that rolls over from month to month
Consumer Financial Protection Bureau. What do I need to know if I’m thinking about consolidating my credit card debt? What do I need to know if I’m thinking of consolidating my credit card debt?
Experian. What is the average number of credit cards per US consumer? What is the average number of American consumer credit cards?
Statesman. Market share of cash, credit cards and other payment methods at point of sale (POS) in the United States in 2020 Market share of cash, credit cards and other payment methods at point of sale (POV) in the United States in 2020
The information on this site, including any third-party content and opinions, is for educational purposes only and should not be considered as legal, tax or financial advice, or to indicate the availability or appropriateness of any Oportun product or service for your particular circumstances. . Contact your independent financial adviser for advice on your personal situation.
Personal loans through Oportun are subject to approved credit. Terms may vary by applicant and state and are subject to change. If you refinance, you may pay interest over a longer period of time or at a higher rate, and the overall cost of your loan may be higher. Loans in AZ, CA, FL, ID, IL, MO, NJ, NM, UT and WI are originated by Oportun, Inc. Loans in California are made pursuant to a California Lenders Financial Law License. Loans in NV are originated by Oportun, LLC. In AL, AK, AR, DE, GA, HI, IN, KS, KY, LA, MI, MN, MS, MT, NC, ND, NE, NH, OH, OK, OR, PA, RI, SC, SD , TN, VA, VT, WA and WY loans are originated by Pathward®, NA State terms, conditions and restrictions apply.