The best gift you can give yourself this year is freedom from credit card debt. Here are eight simple, practical ways to stop throwing money away on interest and finally pay it off.
The best gift you can give yourself in the new year or any time, is freedom from credit card debt. Even with a relatively low-interest credit card, you’re literally throwing money away every month if you don’t pay off the entire balance.
Consider: If you have a balance of $5,000 on a credit card at 14% interest and make only the minimum payment due each month, it would take you 22 years and $5,887 in interest to pay it off.
If you’ve gotten yourself into significant credit card debt, the situation may feel hopeless, but it’s not. Billshark offers eight simple ways to get yourself out.
1 Take Stock of Your Bills
Ignoring the problem won’t make it go away. If you sit down and look at your credit card situation, you may find it’s not as dire as you think it is. Look at which cards you have, how much you owe on each, how much the interest rate is, and what the minimum monthly payment is.
2 Prioritize Your Money
Next, tally your monthly income, putting the most important bills at the top (rent/mortgage, utilities, gas/transportation, food and other necessities), then see what’s left to pay on your credit cards.
3 Negotiate Lower Rates
If you have good credit, call each of your credit card companies and ask for a lower rate. You may be surprised to find how easy it is to get them to agree to this. They’re making a bundle off of you in interest rates, and they won’t want to let that go, so they’re often willing to lower your rate to retain you as a customer.
4 Balance Transfers
If you have credit cards, you constantly receive offers from each of them to transfer your other card balances at a low—sometimes 0%– interest rate for a fixed period of time. Sometimes this period can be as long as 21 months. This is an excellent way to use their money without interest for that period, and use the savings toward paying off this card.
A word of caution: Banks never give away something for nothing. First, they’re betting you won’t pay off this new balance before the higher interest rate kicks in. Second, there’s always a “balance transfer fee,” typically a percentage of the balances being transferred. Calculate whether this fee will actually cost more than what you’d save in interest on the other cards.
5 Use the Snowball Method
Begin with your highest-interest credit card and put every spare cent into paying that one off. When you’ve done that, take the payment from that card and add it to the payment you’re already paying on your next highest-interest card, and so on. In addition, apply any windfalls (tax returns, bonuses, savings Billshark finds for you, etc.) to whichever card you’re working on paying off.
6 Pay Twice a Month
This trick has been used for years by mortgage holders to pay off their mortgage sooner. If you’re paid twice or more a month, make two payments on your credit card balance each month. Doing this reduces the average daily balance on your credit card, resulting in lower interest charges on the full balance.
7 Consolidate Debts
As a last resort, you may be able to obtain a consolidation loan from your bank or a private lender with a lower interest rate and payment than you’re making on all your credit cards. If you really can’t swing the payments on all your cards, this may make sense. But if you go this route, it’s critical that you stay off your credit cards. A consolidation loan is not license to run up more credit card debt. Put them away, but don’t cancel them, because part of your credit score is calculated on how much credit you are using vs. how much you have available. The less you’re using, the higher your score.
8 Ask About Debt Forgiveness
If you’re seriously in debt and cannot afford to pay it off, talk to your creditors about debt forgiveness. They will often settle for a lesser amount than you owe, or offer you a repayment plan that you can afford. This will impact your credit score, and you may have to pay taxes on the amount forgiven, but it’s better than filing for bankruptcy.
And as always, let our sharks help you find “hidden money” on your bills that you can put toward lowering your credit card balances.
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Frequently Asked Questions
How long does it take to pay off $5,000 in credit card debt with minimum payments?
If you carry a $5,000 balance on a credit card at 14% interest and pay only the minimum due each month, it would take 22 years and $5,887 in interest to pay it off. That is why paying more than the minimum, and tackling the balance with a clear plan, matters so much for getting out of credit card debt.
Can I get my credit card company to lower my interest rate?
Often, yes. If you have good credit, call each of your credit card companies and ask for a lower rate. Card companies make a bundle off your interest and do not want to lose you, so they are frequently willing to lower your rate to keep you as a customer. It can be surprisingly easy to get them to agree.
How does the snowball method for paying off debt work?
Begin with your highest-interest credit card and put every spare cent toward paying it off. Once it is paid, take that card’s payment and add it to what you are already paying on your next highest-interest card, and so on. Apply any windfalls, such as tax returns, bonuses, or savings Billshark finds for you, to whichever card you are working on.
Are balance transfer offers worth it?
A 0% balance transfer can be an excellent way to use the bank’s money interest-free for a fixed period, sometimes as long as 21 months, and put the savings toward your balance. But banks bet you will not pay it off before the higher rate kicks in, and there is usually a balance transfer fee. Calculate whether that fee costs more than the interest you would save.
What happens if I ask creditors for debt forgiveness?
If you are seriously in debt and cannot afford to pay it off, talk to your creditors about debt forgiveness. They will often settle for less than you owe or offer a repayment plan you can afford. This will impact your credit score, and you may owe taxes on the forgiven amount, but it is better than filing for bankruptcy.
One Great New Year’s Resolution: Cut Credit Card Debt page context
One Great New Year’s Resolution: Cut Credit Card Debt is a Billshark page. It can help you with your bills and your choices, and it can show you how to save.
Cut credit card debt with 8 simple steps: take stock, negotiate lower rates, use the snowball method, balance transfers and more.
Use this page to learn about Billshark. Then go to the part of the site that fits what you need. Small steps add up. You can save a lot over time.
We share this page to help you make sense of your monthly bills, your choices, and what to do next. Keep this page handy. Ask us if you get stuck.
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The best gift you can give yourself this year is freedom from credit card debt.
The best gift you can give yourself in the new year or any time, is freedom from credit card debt.
Consider.
If you’ve gotten yourself into significant credit card debt, the situation may feel hopeless, but it’s not.
Ignoring the problem won’t make it go away.
Next, tally your monthly income, putting the most important bills at the top (rent/mortgage, utilities, gas/transportation, food and other necessities), then see what’s left to pay on your credit cards.
If you have good credit, call each of your credit card companies and ask for a lower rate.
If you have credit cards, you constantly receive offers from each of them to transfer your other card balances at a low—sometimes 0%– interest rate for a fixed period of time.
A word of caution: Banks never give away something for nothing.
Begin with your highest-interest credit card and put every spare cent into paying that one off.
This trick has been used for years by mortgage holders to pay off their mortgage sooner.
As a last resort.
If you’re seriously in debt and cannot afford to pay it off, talk to your creditors about debt forgiveness.
And as always, let our sharks help you find “hidden money” on your bills that you can put toward lowering your credit card balances.
If you carry a $5,000 balance on a credit card at 14% interest and pay only the minimum due each month, it would take 22 years and $5,887 in interest to pay it off.
Often, yes.
Begin with your highest-interest credit card and put every spare cent toward paying it off.
A 0% balance transfer can be an excellent way to use the bank’s money interest-free for a fixed period, sometimes as long as 21 months, and put the savings toward your balance.
If you are seriously in debt and cannot afford to pay it off, talk to your creditors about debt forgiveness.
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