How to Get out of Credit Card Debt
If you don’t keep up with your credit card payments, you are inevitably going to fall into debt. This happens to everyone, so don’t freak out if you find yourself in a big financial hole. While it is best to avoid debt entirely, you need to know how to get out of it if you’re ever in that situation. Here are some tips to help you get back on track.
- Cut back on your spending so you have more money to save. You might have to sacrifice eating out for a few weeks, but that will save you from getting a bad credit score.
- Make half payments every two weeks. Even though this seems like it will lead to the same money, it’ll actually result in an extra payment at the end of the year. Do the math if you don’t believe it!
- Turn in your payments on time. Anything you turn in late will result in fees, which will put you even further behind.
- Pay more than the minimums. If you rely on minimum payments to get out of debt, you’ll spend years making payments and building unnecessary interest.
- Consolidate your debt. This applies to situations when you have multiple forms of debt or multiple credit cards that are maxed out. Get a personal loan to cover all those balances, and then pay that off.
The goal here is to put away as much money as possible so you can get rid of your debt right away. If you let it sit for too long, it will have a negative impact on your credit score and cause you to pay more than what you should have to.
Saving vs. Paying Down Dept
You have the option to either pay down your balance through your credit card company or save to pay it all at once. Both options come with their own pros and cons. If you make payments to your credit card company, you will lower the amount of interest accrued on the account. If you save and pay in one lump sum though, you might be able to earn interest on your savings account to make up the difference. The key here is to compare the interest rate on your credit card to the interest rate on a savings account, CD, or similar account. Figure out which option will save you the most money and use that as a foundation for payments.