Making Credit Card Payments: Smart Debt Reduction Strategies
Being in debt isn't easy. Credit card debt can feel like the weight of the world on your shoulders. When you can't afford to pay off your balance each month and interest rates are eating away at your payments, you will need to create a monthly budget, figure out your best repayment option and stick with the plan you made.
If you're in extreme credit card debt, your best bet might be to consult with a credit counseling agency. Not only can they counsel you on the best path to take, but they can also create a debt repayment plan and even contact your creditors for you to potentially lower interest rates, monthly payments, or even total amount owed.
If you want to tackle your debt on your own, it's best to decide how much you should pay each month. This will vary from person to person, depending on how large their debt is and how many credit cards they have.
Paying High Interest Rate Credit Card Debt First
Credit card debt is expensive. The average rate on a standard variable-rate card is nearly 15%, and it's not uncommon for young adults to pay even higher rates. If you carry a balance on multiple cards, you should focus on paying off the highest rate card first while continuing to make just the minimum payments on your other accounts until you have successfully erased the debt of your first card and then repeat with the next highest interest rate.
Total up all your card's monthly minimums and decide how much money you can come up with each month on top of this amount to apply to your credit card debt. If you don't believe you can afford to pay any additional amounts over the minimum payment, create a budget and find ways to cut your expenses. It may be difficult, but in order to get a handle on your finances you need to be making more money than you spend.
Credit Card Payment by Direct Deposit
Most credit card companies will let you set up automatic payments from a checking account and allow you to decide how much you pay each month. By putting your payments on autopilot, that money has no chance of becoming a temptation for you to spend it on something else. It also helps you avoid late payments that can damage your credit score, cost you a ton in fees and trigger an interest rate hike.
Eliminate Credit Card Debt by Paying Down 50% Each Month
A great rule of thumb to quickly pay off your credit card debt is to pay 50% of your balance each month until you have paid it all off. This strategy eliminates your debt with the least amount of interest being paid. So, if you have a balance of $1,000, pay $500 for the first month and then half that every other month until you're finished.
While this method is great for tackling debt quickly, it is unrealistic to those who are struggling to make ends meet. After you've created your budget and can decide how much you can afford to pay, read more about easy ways you can reduce your debt and try to negotiate with your creditors.