Did you know the average American household has slightly over $8,000 in credit card debt? With most Americans having about four credit cards, it’s easy to see why credit card debt is a big problem in the United States.
Make no mistake. Credit cards are an essential financial tool. They help you build your credit and can come in handy during a financial emergency.
However, if you don’t practice financial prudence, it’s easy to end up in a hole of debt. And if you’re already in debt, you’re probably wondering how to get out of it.
Here’s your guide to paying off credit cards in full.
Have a Good Understanding of Your Credit Card Debt
It’s not uncommon to find people who’re in credit card debt but don’t even know how much they owe. If you’re among these people, the first step to getting out of credit card is to have a clear picture of your debt.
Start by figuring out the total amount of money you owe. If you’ve got multiple credit cards, you can call up the card issuers and ask about the state of your accounts. You also need to establish whether the account is still in good standing or has already been sent to collections.
Next, establish the interest rate being charged on each balance.
Ultimately, you should end up with something like this:
- Credit card 1: $4,000, 9 percent APR
- Credit card 2: $3,000, 7 percent APR
- Credit card 3: $5,600, 11 percent APR
So, this person owes at least $12,600, assuming the balance is inclusive of annual interest.
Pay Off the Balances Individually
Now that you know how much owe and the rate on each card you’re good to craft a repayment strategy.
One strategy is to pay off the balances individually. You could keep making the minimum payment on each card, but that will take forever to get out of credit card debt. You need an aggressive approach.
For instance, you could prioritize paying off the card with the highest balance. This means paying more than the minimum on this card while paying the minimum for the other cards. Paying off the biggest balance sooner will give you the motivation to keep at it.
Alternatively, you can prioritize the card charging the highest interest. This makes good financial sense because you’ll end up paying more on the card with the highest rate – that’s if you keep paying the minimum.
Go for Credit Card Debt Consolidation
The most effective way to get out credit card debt is to go for debt consolidation.
When you’ve got multiple credit card balances, you can combine them into one. There are lenders who specialize in giving consolidation loans, and as long as you qualify, you will get a lower rate than the weighted average of all your credit cards.
The good news? You can get a consolidation loan even when you’ve got bad credit. Check out this guide on how to get debt consolidation loan for bad credit.
Paying Off Credit Cards in Full Made Easy!
Credit cards are a handy companion, but if you’re not careful, you can easily rack up unmanageable debt. However, paying off credit cards in full is doable. You just need the right strategy.
Need more credit card management tips? Keep reading our blog.