If there’s something that’s bothering Americans, it’s their own credit card debt that haunts them in their sleep. The Nilson Report found out that Americans own a whopping $1 trillion in debt and more. What’s more haunting is that this figure was recorded in 2016. A debt of $1T already matches the GDP of 15 countries in the world.
You think that’s amazing? Think again. If you’re one of the millions who have an outstanding debt record, you better start paying your debts as soon as possible. You may want to pay more than the minimum every month to quickly solve your loan as fast as possible. As long as you prolong your credit card debt, the interest piles up, thus costing you’re more than what you plan to pay for. That’s why we recommend paying more than the minimum to be able to solve your debts easily.
Have you made up your mind in finally tackling your debts? Aside from the usual advice of paying on time, here are five more tried-and-tested ways of dealing with your credit card debt:
1. Diligently pay above the minimum require
As tempting as it may sound, you should always try to pay more than the minimum due amount. On every statement delivered to you includes this information: the minimum amount required for your transaction, your outstanding balance, and interest rate info. You should consider sitting down and computing how much you should pay above the minimum to be able to finish your debt quickly. You should also consider your financial situation and expenses. Don’t pay a large sum if you cannot afford it. Remember that you still have other expenses!
2. Live on a Frugal Budget
Now that you’re starting to pay your debt, it’s time to change the way how you spend your money to limit yourself to spending more than what you can. Living frugally with a bare-bones budget is a great way to set yourself some limits and how you can get yourself in control of your expenditures.
This budgeting technique works simply: you’ll have to allocate money for all your essential expenses, and nothing else. A simple budgeting technique such as this can help you save up more money to pay your debt, or if you are anticipating a loss that has a direct impact on your expenses.
However, even if you’ve finished paying for your debt, we still recommend continuing living frugally — so you won’t fall again into debt.
3. Ask for lower interest rates on your credit cards
Even if you just want to cut your credit card into two to stop this debt madness, we recommend sticking to your current card through and through. If you get a new card, you risk the chance of maintaining your current credit score standing. Every time you open a new account, it puts a dent in your credit score, resulting in higher interest rates that will only add more fuel to your burning debt.
4. Use a personal loan to consolidate your balances
Personal loans could help you consolidate your debts into one more manageable loan. If you just do it right, it can save you money and eventually improve your credit score. However, remember that taking out a personal loan will not pay your credit card debt. It will just refinance your debt for a loan with better and easier terms.
Getting a personal loan from www.firstchoicefinance.co.nz will also convert your credit card debt into a fixed-term loan. Most personal loans have terms ranging from 1 to 5 years. Credit cards are open-ended sources of credit. As long as you pay the minimum amount, there is no fixed deadline to pay your credit card balance.
Depending on how much you currently pay toward your credit card debt, getting a personal loan could extend the term of your credit card debt. Although doing this would probably lower your monthly payments, it may also increase the overall cost of your debt. Unless reducing your monthly payments is your chief concern and you can’t afford any other solution, it’s best to opt for the shortest possible term.
5. Opt for a balance transfer on another account
A balance transfer is simple: if you have some outstanding balance on your card or some of your cards, you can transfer all of your outstanding balance to another account. It is a good way to save some money. How? Supposed you have a high balance on one of your credit cards, you may be able to transfer that debt to a credit card with a lower rate. Doing this will save you money on interest and possibly helping you pay your debt faster.
There are many ways to lessen your credit card debt. But in or order for you to successfully dug out is to change your financial behavior and prioritize where you spend your money.