Credit card debt can be a nightmare for many borrowers. Many want to eliminate credit card debt or come up with a plan on how to reduce debt levels. There are many tips and ways in which you can reduce your credit card debt to live less stressful financial life.
Did you know that the average American has a credit card balance of $6,375? And that the average American household with credit card debt owes $16,883? Considering that, it’s quite likely that you’re carrying around quite a bit of debt yourself. If that’s the case, you might want to consider some of the tried and true ways to pay off big debt fast.
Digging yourself out of the hole of debt that you have created for yourself can be tough. There’s no doubt about it. There is also no doubt about the fact that if you put the right tools to work, you can be debt free.
The very first step to take is to figure out what got you to this point. Perhaps it was an emergency that forced you to put thousands of dollars on your credit card. Perhaps you have been living outside your means for years and the debt slowly grew before it spiraled out of control. Or perhaps, it’s a combination of these kinds of factors that you failed to plan for.
How did those cards get maxed out?
You need to do some introspection if you really plan on ridding yourself of your credit card debt. Take stock of why your debt has reached such a large number, why you want to get out of debt, and how you’re going to change your daily habits to make that goal possible.
Once you’ve got all that figured out. You might want to consider one of two ways to start paying down your $15,000 worth of credit card debt efficiently. It all depends on what you value you. Would you rather pay your debt down as quickly as possible, or would you rather start feeling the hole get a little less deep early on? It’s all a matter of what motivates you, and your answer will help dictate whether or not you want to employ the strategy of the debt avalanche, or the strategy of the debt snowball.
Both sound rather imposing, but actually they’re great ways to start the pathway to financial freedom.
Just want to pay it all off as quickly as possible
The Debt avalanche is for those who want to pay down their $15,000 worth of credit card debt as quickly as possible. How it works is, basically you pay off the minimum payments on all of your cards and then put whatever money you have left to the credit with the highest interest rate. Once you pay off that debt in full, you move to the debt with the second highest interest rate, and so on and so on until all of your cards are paid off. This is hard for some people because it will feel like you are making very little progress at first. It is a tried and true method, however, and will save you a lot of time and money in the long run.
The Debt snowball is the other proven option and is meant primarily for people who need to see change in order to get motivated. How it works is, you apply the same method of paying the minimum payments for all your debts, but then you apply whatever you have left to the smallest balance you have. Once you pay that off in full, you move on the second biggest balance, all the way up until you are finally tackling the biggest balance you have left to face. This method actually takes longer than the avalanche method, and therefore you will be accruing more debt along the way as well, but it definitely does give those who employ a sense of movement, change, and progress.
If you’re interested in going another route to take control of your credit card debt, two possible options are taking out a personal loan or getting a balance transfer credit card. Both depend on your credit score, and both can be the saving grace you’ve been looking for.
If your credit score is above 640, chances are good that you’ll be able to qualify for a personal loan. The reason why personal loans are attractive to people with a lot of credit card debt is due to a number of reasons.
Consolidating Credit Card Debt and ways to reduce your monthly payment
First, a personal loan allows you to consolidate your debt into one place. Instead of having to worry about multiple payment periods and multiple interest rates, you can just focus on the one. The main reason why personal loans are so attractive, however, is because they usually have much lower interest rates than credit cards. People with truly great credit can enjoy APRs below 6%, that could be less than half of the interest rate you are currently paying on your card.
The other option to consider is a balance transfer credit card. This route is especially attractive for those with excellent credit. If your credit score is over 700, you could qualify for a balance transfer credit card that offers a 0% APR period anywhere from approximately 6 to 18 months. That would mean paying zero interest on the entirety of your credit card debt for over a year!
It’s important to remember a few things when using a balance transfer card. The main one is to not to put other charges on it, because that can have an impact on your 0% APR promotional period. It is also important to keep in mind when the promotional period ends, because if there is any debt left over once it does, your issuer will likely start tacking on interest to what ever is left.
Now that you know the best ways to tackle your $15,000 worth of credit card debt, it’s time for you to take stock of which avenue sounds the most attractive and the most possible for you. There is no wrong answer here, you just have to be diligent and determined, and before you know it you’ll be peaking your head out from that hold of credit card debt!
Once you get out of debt you may even consider starting investing!