Paying Off Credit Card Debt Fast

Americans owe a lot of credit card.

Shockingly, recent numbers show that Americans owe more than $1 trillion in credit card debt. That’s greater than the GDP of all but 15 countries.

According to WalletHub, which analyzed 2016 credit card debt in this country, the average American family owes $8,377. Additionally, this report also showed an upward trend per household, jumping 6 percent in the past year. Household debt is now as high as it was during the Great Recession.

Household income has grown by 28 percent over the past 13 years. This increase, however, has lagged behind the cost of living, which increased more than 30 percent during the same period. Consequently, Americans are taking on increasing amounts of credit card debt, one of the most expensive ways to borrow, to bridge this gap. With the average credit card interest rate of 18.76 percent, the average household pays approximately $1,292 in credit card interest each year.

Although this exorbitant, and continually growing, amount of card debt is a serious threat to our economy and the overall financial health of the heavily indebted, it doesn’t mean Americans are doomed to be indebted for life. But, remedying this situation requires major change and time.

Unfortunately, short of filing bankruptcy, which damages your credit for many years to come, there isn’t any magical, a quick wave of the wand, fix. Eliminating your credit card debt will require long-term behavioral changes as well as discipline. Careful spending habits and steady debt eradication is the key to gaining financial freedom.

Strategies to help pay off credit card debt fast:

  1. The most obvious one…stop using your credit cards. This doesn’t mean you should close your credit card accounts – this can actually hurt your credit score. However, if you are prone to impulse buying on credit, put the cards away!
  1. Use a card with no balance for normal purchases. You pay interest immediately on new purchases when you use a card with a balance.
  1. Budget more towards debt repayment. Budget as much as you can towards debt repayment. If you have balances on multiple cards, with about the same interest rate, attack the one with the smallest balance first. Dedicate the largest portion of your credit card repayment budget to this card. Once this card is paid off, attack the card with the next smallest balance…and so on and so on, until all of your credit card balances have been paid in full. This is more of a psychological strategy than a financial one…you’ll feel a huge sense of accomplishment when you’ve paid off that first card.
  1. Reduce expenses. One of the quickest ways to eradicate credit card debt is to cut your spending and apply that savings toward your credit card debt. This requires a plan…a budget…and sticking to it. By closely examining your family’s spending habits, you are sure to find several ways to cut your monthly expenses.
  1. Make extra payments using new money. Cutting expenses can only take you so far. Find ways to generate some extra income – work an extra day on overtime a week or have a garage sale – and put this extra money, including any tax refunds or unexpected income, towards your credit card debt.
  1. Ask for lower interest rates. This may or may not work. But, it’s worth the try. Knocking four interest rate points off a $10,000 credit card balance can save you hundreds of dollars in interest annually.
  1. Pay off the highest interest debts first. If you have credit cards with much higher interest rates, pay those off first. Pay the minimum required on every card except the one with the highest interest rate. Put most of your debt repayment budget toward the balance with the highest interest rate. Once this card is paid off, do the same with whichever remaining card balance has the highest rate. This strategy helps you devote less money to interest and more to paying off debt.
  1. Make two payments per month. Most credit card companies use average daily balance to compute interest charges. So, instead of paying one larger payment per month, break it up into two monthly payments. You’ll lower the average daily balance…so, you’ll pay less interest! To magnify this effect, try making a payment every week.
  1. Transfer debt to zero-interest credit cards. Transferring some or all of your debt to a card with a lower interest rate can make repayment much easier.
  1. Get a debt consolidation loan. This is only a good idea if you can get an interest rate lower than the average of the rates you’re paying on your credit cards and you make a definite plan to pay off the loan quickly.

Any of one of these strategies can be helpful on its own. However, implementing several of these strategies simultaneously will help you pay off your credit card debt more quickly.

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