4 cheapest ways to pay off credit card debt
If you are dealing with credit card debt, you are not alone. US credit card debt now stands at $ 14.3 trillion, an increase of 1.1% from the previous quarter, according to recent data from the New York Federal Reserve.
Fortunately, however, there are ways to escape the debt cycle. Below are four proven methods for paying off credit card debt. Read one below for an explanation of each, as well as a more in-depth look at the pros and cons. With this knowledge, you should be able to make an informed decision about which debt repayment strategy is best for you.
1. Consolidate your credit card debt with a personal loan
The first debt repayment strategy is to consolidate credit card debt with a personal loan.
The Credible online marketplace can also help you find the best rates available. You just need to connect some of your information to their free online tools to compare the options.
With a debt consolidation loan, you can combine multiple credit card balances into one. You will use the loan funds to pay off your credit cards, and then you will only be responsible for one monthly payment for your debts.
Personal loans often offer a lower interest rate than credit cards, which means choosing this method can help you save on the total amount you pay in interest charges. Plus, this repayment strategy will help streamline your finances since you won’t have to worry about making multiple credit card payments each month.
As with any new type of financing, you will need to meet the lender’s eligibility criteria in order to qualify for a debt consolidation loan, which will likely involve checking your credit history. If your credit score is lower, you may not qualify or may not qualify for a loan large enough to cover all of your debts. Additionally, it is important to know that some lenders charge an upfront fee for closing the loan.
If you think a debt consolidation loan might be the right choice for you, you can use Credible to see what options are available to you.
You can also use Credible’s personal loan calculator to find the best rates available to you.
NOW IS THE BEST TIME TO BUILD CREDIT CARD DEBT – HERE’S WHY
2. Open a balance transfer card
Similar to a debt consolidation loan, a balance transfer card allows you to combine your existing credit card balances into one. Typically, these cards also offer an introductory zero percent APR interest rate on balance transfers, which will give you a set period to work on paying off your debt without accumulating new interest charges.
If you can pay off your balance before the introductory interest period ends, you’ll save money by not having to pay interest charges. As an added bonus, knowing that this period is limited in time can help you stay motivated to pay off debt.
Credible can help you find the right credit card for you. Choose credit cards with balance transfer and get a breakdown of annual fees, welcome offers, required credit and more.
ALL ABOUT BALANCE TRANSFER CREDIT CARDS
If you are unable to pay off your balance at the end of the introductory rate period, you will begin to accrue new interest charges at the card’s regular balance transfer rate. Additionally, if you make a late payment, the introductory rate period may be revoked.
Those who think a balance transfer card might be a better choice for them should consider visiting Credible to see all of their zero APR credit card options in one place.
3. Use the debt snowball method
With the debt snowball method, you will leave your existing credit card balances as they are. When implementing this debt repayment strategy, you will continue to make the minimum payment on most of your cards. At the same time, you will be focusing your energies on paying off the card with the smallest balance.
Once you’ve paid off that card, you’ll focus on paying off the card with the next smaller balance. You will continue to do this until you have fully paid off all of your cards.
By paying off the card with the smaller balance first, you set yourself up for a series of quick wins, which can help you feel more motivated to continue paying off debt.
The debt snowball method ignores interest charges. Tackling your smaller debts first can lead to you paying more interest over time.
HOW DOES THE SNOWBALL DEBT METHOD WORK?
4. Use the debt avalanche method
The debt avalanche method is the reverse of the debt snowball method. In this case, your focus will be on paying off the card with the highest interest rate first. Once this is paid off, you will pay off the card with the highest interest rate until all of your debts have been paid in full.
Using this method will help you save on the total amount you will pay in interest charges. By paying off your highest interest debt first, you’ll end up paying less over time.
HOW DOES THE DEBT AVALANCHE METHOD WORK?
It may take longer to see progress with this method, especially if your card with the highest interest rate also has a large balance.
Ultimately, choosing the right debt repayment strategy is a personal choice. However, it may be helpful to consider factors such as whether your credit history is strong enough to open a new card or take out a new loan. Then, once you’ve decided on a strategy and worked on paying off your debt, building better credit habits in the future is crucial. For example, you may decide to charge only what you can afford to pay in full.