Regardless of how much you owe, there is a proven way to pay off your credit card debt without too many problems. With a little discipline and willingness to develop better financial habits, you can pay off your credit card debt and start working towards other financial goals.
Pay more than the minimum amount
Aim to pay off your credit card debt quickly by paying much more than the minimum amount each month. As you commit to saving more, you may be able to pay hundreds or even thousands more than the minimum required amount. Over time, this will significantly reduce the amount of interest you ultimately pay and reduce the time required to repay it.
Target higher interest debt
Start by paying off debts subject to higher interest rates. This can save you money over the long run, as you will be minimising the total interest payable.
On the other hand, recent research suggests that targeting smaller amounts could help you stay motivated. If you have several credit cards with outstanding amounts to pay off and find it difficult to remain motivated, you could trying paying off the lower balance first.
Look for better deals
Banks and other institutions often have balance-transfer specials and other deals. Research and compare credit card rates, and do a balance-transfer if possible. It also may be worth consolidating your debt into one account, especially one with a lower interest rate. You could also consider taking out a personal loan to quickly pay off any high interest debt. However, only do this if the interest rate on the loan is less than that on your credit card debt.
Use a credit card calculator
Use a credit card calculator (many are free to use on the Internet) to motivate yourself to pay off your credit card debt sooner rather than later. Doing the numbers gives you a clear picture of the consequences of your current debt situation. The calculator will tell you how much you will end up paying if you make only the minimum repayments each month and how much you will pay if you pay more.
Budget and avoid new debt
While budgeting does not sound particularly exciting, when it comes down to it spending less and/or earning more is the only certain way you can pay off your credit card debt sooner rather than later. Plan your budget to avoid incurring any new debt on your credit cards. You could even consider switching to a prepaid Visa card, so you are only spending money that you have. This can help you be wise in how you handle money and avoid further debt.
Set up a budget and track your spending, and set a clear savings target for every month. If you truly want to have your finances in order, you will find the motivation to do so.
Save and repay
Develop positive savings habits and use tools to support your new habits. Set up a new savings account and automatic dedications on pay day. Use your budget to identify all instances of unnecessary spending, even small expenses such as your daily coffee or cake. Consider how much of these extra savings you can put towards your credit card debt each payment period.
Set a goal
Setting a goal for after your pay off your credit card debt could also keep you motivated and focused. You can set a goal to take an overseas holiday, buy a new car, purchase an investment property, or invest in shares. As you gradually pay off your debt, you can use this long-term goal to remain motivated.
