Helpful Tips for Paying Off Credit Card Debt in The New Year

Debt can be a mortifying four-letter word, and multiple credit card debt can be especially troublesome. The gleaming piece of plastic seems like a great tool to have when the card issuers are enticing you with a low APR and an extended credit line. But just a few shopping sprees and some unforeseen emergencies later, it feels like a millstone around your neck.

What Makes Credit Card Debt Especially Bad?

Revolving credit card debt comes with cripplingly high interest rates. When you just make the minimum payment at the end of each billing cycle, not only does it take a long time to pay off the entire balance, but you also end up paying a huge amount as interest on the initial spend.

Paying the minimum due amount, especially with multiple cards, can have a negative impact on your credit scores too. This is because credit utilization (the percentage of credit available to you) carries considerable weight in your credit scores.

The best way to maintain a healthy credit score is to keep the balances low, or ideally, pay off the full balance each month.

Strategize to Win the Battle against Credit Card Debt

You can fight your way out of the credit card debt trap one step at a time. We will discuss some strategies that can help you take control of your financial health by paying off your credit card debt. The first step in fighting the battle is to arm yourself with relevant information. You must gather all the relevant details for all your cards, including their balances, due dates, interest rates, and minimum payments.

Here are some more practical steps that can help you tackle your debt:

Control Your Spending

The mountain of debt you face has not sprung up overnight. So, you need to realize you cannot wave a magic wand at it to make it disappear in a flash. You need to replace the excessive spending habits with frugality and restraint. And there are no shortcuts. The first step that will pave your way out of existing debt is not to add more debt. Stop using your credit cards for a while and use cash. Paying with cash will help you remain cautious and cut down on your spending.

Consolidate Your Debt

If necessary, keep just one card instead of multiple credit cards. Consolidate and transfer balances from all your cards to one card. Find out if you have a balance transfer offer on an existing card, or else, apply for a new card that offers zero APR on such transfers for an initial period. Select the cards with higher interest rates and transfer the balances to the new card. Start paying off on the new card and try to pay off before the 0 percent period ends.

Prioritize Your Debts

Start with compiling information on all your credit card debts and make a list based on their importance. Figure out your priorities, whether it is to pay off the one with the highest interest rate or the one with the lowest credit line. Aim for a payment strategy that corresponds to your financial needs, while keeping yourself sufficiently motivated to pay off your debts.

Use the Avalanche Approach

The avalanche method saves you money while helping you pay off your debts faster. This method seems to be the popular choice for getting out of credit card debt. In the avalanche method, you need to pay higher amounts towards cards with higher interest rates, and lower or minimum payments towards cards with the lowest interest rates.

Use the Snowball Approach

In this method, you pay off the cards with smaller balances first. This boosts motivation and provides a sense of accomplishment to people who favor it to get out of debt. The debt snowball is suitable for you if you need to pay off several small balances on different credit cards but are not eligible for a new balance transfer card to shift the balances.

Personal Loan

The best strategy is to keep paying off your credit card balances to be debt-free eventually. But if managing multiple credit card debt is looking too daunting or slow, you could try a different approach. It would not be a bad idea under the circumstances to pay off several credit cards with the help of a low-interest rate personal loan.

Debt Settlement

Debt settlement can be an option if you can afford to make a one-time payment to settle your debts. You can choose to negotiate the settlement on your own or hire a professional company that engages in debt settlement. Do your homework before hiring a company to avoid the typically high fees these debt settlement companies charge for such services.

File Bankruptcy as the Last Resort

If you feel the multiple credit card debt and their high-interest payments are spiraling out of your control, bankruptcy could be your last resort. Even though bankruptcy can provide you a fresh start, you may want to avoid it unless inevitable because of its adverse effect on your credit status.

You can choose one of the two types of bankruptcy. Under Chapter 7 bankruptcy, you need to surrender property, while that is not the case under a Chapter 13 bankruptcy. It will be in your best interest to hire an experienced attorney before filing bankruptcy as it can be a long and complex process.

Contact an Experienced Bankruptcy Lawyer

If you are drowning in debt and it seems like bankruptcy is your best option, the first step is to speak with a skilled and knowledgeable bankruptcy attorney. Schedule a consultation today to discuss your circumstances, so you can make the most informed decision.