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Most people looking to pay down their credit card debt have multiple balances outstanding on several credit cards. When this is the case, which credit card debt should you pay down first? There are several ways to go about paying down your credit card debt. Here are four tips to simplify the task and help you pay your debt off faster.
1. Wipe out low balances. It is generally recommended to first pay off the credit card debt with the highest interest rate. However, if you have low balances on multiple credit cards, which can be paid off in two to four months, wipe those out first. This will greatly simplify your finances and make it easier to manage your remaining credit card debt. Plus, it will make it easier to avoid having credit card debt continue to slowly creep up on multiple cards without you realizing it.
2. Pay off new charges in full. Charge new expenses to one credit card, and pay the balance off in full each month. This will force you to make ends meet and it’s an easy way to avoid taking on new credit card debt, even as you pay off debt on others.
3. Set a goal. Use a Credit Card Calculator, such as this one on Bankrate.com, to set goals for when and how to pay the debt off. Explore different scenarios, such as how long it will take to pay off your debt if you pay $300 a month versus $200. To motivate yourself, it’s also useful to use a calculator that lets you calculate how much interest you would pay on the credit card debt at different monthly payments. Learning about how much you can save by paying off your credit card debt faster is a great way to motivate yourself to cut back in other areas so you can knock off your debt faster.
4. Start a Snow Ball. Once you’ve gotten rid of all the low balances on your credit card, begin to focus on the card with the highest interest rate first. Each month, pay as much as you can on that card; pay the minimum due on all your other credit cards. When you finish paying that card off, focus on the card with the next highest interest rate. Add the monthly payment amount you made on the credit card you just paid down to the monthly amount you were already paying on that card.
Continue rolling over the payments in this way. In this way, the amount with which you pay off each card will increase, much like a snowball rolling down a hill. As your debt payments on your targeted card grow, your credit card debt shrinks at a faster and faster speed, which makes it easier to keep going.
Make sure that unexpected expenses don’t get you off the path. If a financial emergency comes a long, take a break from paying down the debt as fast, but be sure to resume again as soon as you can.
Keep at it. By cutting back on expenditures where you can and by putting a solid debt reduction plan in place, you will be able to pay off your credit card debt much faster than you think.
