How To Eliminate Credit Card Debt In 6 Ways

“Pay off your debt first. Freedom from debt is worth more than any amount you can earn.” – Mark Cuban

In our country, credit cards are one of the popular types of debts! Many people are reeling under credit card debt. And eventually, they are slogging to find some effective ways to eliminate the debt from their lives!

The worst part of credit cards are high Annual Percentage Rates (APRs) and hefty late fees! Most likely, you have to sacrifice a substantial amount of your paycheck to pay credit card debt.

So, at the end of the month, your savings become either zero or too little! Eventually, you may have to compromise your financial goals too! Precisely, credit card debt becomes an obstacle to your financial well being!

So, what can you do to get rid of credit card debt?

Don’t worry, mate! Here are some of the best possible tips that can help you eliminate credit card debt from your life completely!

Let’s start one by one!

1. Re-look at your budget

Do you follow a budget?

If yes, that’s great, buddy! You are one step ahead in your debt pay-off journey! However, if you don’t follow a budget, you should create a realistic budget at the earliest!

Because the first and foremost thing to pay off credit card debt is organizing your finances accordingly! So, scrutinize your budget categories and check where you can trim costs as much as possible! I hope you will be able to chalk out some categories where you can cut down costs!

By doing so, you can keep aside some funds and you can use that money to pay off your credit card debt!

2. Opt for a balance transfer card

Do you have multiple credit card debts? If yes, then it’s a quite cumbersome task to manage multiple payments. And as I said, the high APRs of credit cards make it more difficult to pay off!

So, to get rid of high APRs and multiple payments, you can take out a balance transfer card! Yes, you heard it right!

Taking out a balance transfer card will help you to transfer all your existing credit card outstanding payable amounts to the new credit card!

But make sure that the balance transfer card should have a lower APR than your existing credit card.

Many credit card companies offer balance transfer cards with 0% interest for an introductory period ranging from about 12 to 18 months! After that, interest will start levying at a rate from about 13.99% to 24.74%.

However, some balance transfer cards like PenFed Gold Visa Card levy a fixed APR of about 17.99% after the introductory period of 12 months ends!

I would advise you to try paying off your credit card debts within the introductory period so that you can save a substantial amount on interest payments!

However, you need to remember certain things before you opt for the balance transfer method:

  • In most cases, you need to have a decent credit score to take out a balance transfer card at a lower interest rate. Else, you might end up with a higher interest rate if you don’t qualify for a 0% interest rate for an introductory period.
  • Check out the balance transfer fee for the new card. You may have to pay a fee based on the amount you are transferring. The fee can range from about 0% to 5% or more of the balance transferred. So, make sure to read the terms and conditions carefully while taking out a balance transfer card!
  • Opting for a balance transfer card can hurt your credit score as you apply for a new credit line. Besides, most likely, the outstanding amount in the new card will be more than 30% of the available credit limit. In that case, your credit score may drop as your credit utilization ratio goes higher!

3. Opt for a consolidation loan

Debt consolidation is always a good idea if you are exhausted with multiple debt payments. By consolidating your debts, you can bundle your multiple credit card debts into a single monthly payment.

Moreover, the interest rate of a consolidation loan is likely to be less than your credit cards. You can save money on your interest payments too! And you won’t have to keep track of multiple bills anymore. You just need to make a single payment for your consolidation loan every month.

Eventually, it will help you to get rid of your credit card debts faster and with ease!

However, opting for a consolidation loan to repay your credit card debts has some cons too!

  • If you don’t have a good credit score, you may not qualify for a personal loan with preferable interest rates. So, if the interest rate of your consolidation loan is higher than your existing credit cards, you may end up accumulating more debt!
  • After paying off a credit card debt, you might be tempted to charge that credit card. Thereby, you will have to pay off your new credit card bill along with the consolidation loan!
  • If you take out a secure loan like a home equity loan to consolidate your credit card debts, your home will be at stake! If you fail to repay the consolidation loan on time, it can lead to foreclosure of your home!

4. Opt for a repayment plan

Snowball and avalanche methods are widely known repayment strategies to repay credit card debts.

In the debt snowball method, you have to target the debt with the lowest outstanding balance amount irrespective of the APR.

Once you repay that debt, you have to move to the next debt with the second-lowest outstanding balance amount and so on. Most likely, you will need relatively less time to pay off a credit card debt with a low outstanding balance amount.

So, once you successfully repay a credit card debt, it will provide you the motivation to help you go through the debt repayment process!

In the debt avalanche method, you have to target the debt with the highest APR irrespective of the outstanding payable amount! After repaying that debt, you will have to move to the debt with the second-highest APR and so on!

Thereby, it will help you to minimize your interest payments! Besides, the avalanche method can help you to get rid of your credit card debts faster too!

Undoubtedly, both repayment plans can help you to eliminate credit card debts effectively. But before you opt for one, you need to consider the following points:

  • With the debt avalanche method, you might face difficulties in keeping patience and motivation through your debt repayment journey. Because most likely, it will take a longer time to repay the debt with the highest APR.
  • In the debt snowball method, you have to focus on the debt with the smallest outstanding payable amount. But in the meantime, credit card debts with high APRs will become a whopping amount and it will take a longer time to pay off!
  • With both avalanche and snowball methods, you have to make minimum payments for all your debts. But making minimum payments will make your outstanding debt amount much cumbersome to pay off. The reason being, you are extending your repayment period by making minimum payments. However, your creditors will keep levying interest on your outstanding balance amount! So, you may end up accumulating a massive amount of interest payments!

5. Don’t make minimum payments on your credit card debts

To avoid late payments, the minimum payment is the lowest amount that you can pay to keep your credit account in good condition. Usually, it ranges from about 2% to 4% of your outstanding balance amount!

Making minimum payments can be alluring to you as you don’t have to pay off your outstanding balance in full. It can help you brace yourself for hefty late fees too!

But let me tell you, making minimum payments, in the long run, is not a good idea!

If you make minimum payments, it will take a much longer time to pay off your credit card debts. You will end up shelling out a lot of money on interest payments!

That’s why the Credit Card Act 2009 clearly states that credit card companies or credit unions have to include a “minimum payment warning” in each credit card statement!

Usually, it is illustrated in a table format that shows approximately how long it will take to pay off your credit card debt. It will also show an estimated amount that you will end up paying to get rid of your credit card debts by making only minimum payments!

So, don’t fall prey to the idea of making minimum payments to repay your credit card debts.

However, if you are going through a financial crunch, you can make minimum payments for some time being! At least, it will be better than defaulting on your credit card payments!

6. Opt for a debt consolidation program

Well, I would say that a debt consolidation program is the best way to eliminate credit card debts! But why?

  • You can make single monthly payments for your multiple credit card debts and with reduced APRs!
  • No credit score is required to qualify.
  • This can help improve your credit score as you are likely going to make consistent payments.

To do that, you need to approach a genuine debt consolidation company that can guide you through the entire debt repayment process.

The financial experts of the consolidation company will try to negotiate with your creditors to reduce the high APRs and waive off any late fees or penalties!

They may also help you to plan a realistic budget so that you can gain control over your finances. You can set aside funds to pay off your debts!

Once your creditors agree, you can start making single monthly payments for your multiple debts to the consolidation company. In turn, the consolidation company will distribute the money among your creditors based on your debt amounts!

However, you will have to pay a service charge to the debt consolidation company for opting for their services! And make sure you consult a genuine debt consolidation company. Else, you might end up getting trapped in more debts!

So, the bottom line is, you have to stop worrying about your credit card debts! As we discussed above, you can opt for any one of the strategic ways to eliminate credit card debt from your life!

Hopefully, you will be able to lead a debt-free life soon and start working on your financial goals! And always remember that you should use your credit lines wisely! Don’t fall prey to the credit card debt trap again!

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By Valentina Wilson on December 19, 2020

Valentina Wilson is a writer and blogger who specializes in personal finance and positive change and associated with BestDebtConsolidation. She has a master’s degree in financial journalism and seven years of experience in personal banking and believes that small behavioral changes are the key to achieving financial freedom.

Follow her on Twitter: @valentinailson