It’s not uncommon to stare down your credit card statement and feel overwhelmed by your outstanding balance. Luckily, there are some proven ways to cut your payments down to size and get rid of the credit card debt for good.
Debt Snowball Method
The snowball method is a strategy that focuses on paying down the account with the lowest balance first. As you direct larger payments toward that balance, you will continue to make the minimum payments, so you don’t default on those payments. Once you’ve paid off one account, you can use the additional funds you have to pay down another balance, and so on. This is a great way to build momentum and tackle your debts without getting overwhelmed. The only downside is that this strategy doesn’t account for interest rates. So, while you are paying off your card with the lowest balance, you may be incurring a high rate on a different card.
Debt Avalanche Method
The debt avalanche is a strategy for paying off credit card debt by prioritizing high-interest debts first. With this method, you focus payments on the highest interest-rate accounts and make only minimum payments on the rest of your accounts. When one account is paid off, you can use the funds formerly allocated to it to pay off another account with a high-interest rate. Repeat this until all debts are paid off. The best part about this strategy is that you’ll be repaying the balance with the highest rate first.
Debt Consolidation
Debt consolidation is a great way to reduce your monthly payments by transferring balances from multiple credit cards and lines of credit into one loan payment. Most people get a personal loan to consolidate credit card debt. With a personal loan, you can lower your monthly interest rate and pay a single monthly payment toward your balance. But you could also consolidate your debts with a balance transfer credit card. In this case, you’ll need to look for a card that charges a 0% APR for the first few months. You should, ideally, repay your loan during this interest-free period.