Are you stuck in the vicious circle of minimum payments? With compound interest building up, it can be difficult to pay off a credit card balance without constant effort and dedication. For the best advice on how to pay off a credit card balance fast, we turned to our friends at Fairstone Financial.
If you want to pay off a credit card balance quickly, you need to commit to making the payments. It might sound obvious, but the way credit cards are designed makes it easy to fall behind on payment in full.
Here are our four steps to quickly pay off a credit card balance:
1. Calculate how much money you have to pay
The problem with credit cards is that bills often show the minimum payment (either a small percentage of the balance only) or the total amount owed on the card. If you want to pay more than the minimum, but can’t afford to pay off the entire card balance, you need to set up a payment plan yourself. Use a credit card payment calculator to figure out how much money you need to pay off your credit card balance in a time that’s convenient for you. You might be amazed at how long it would take you to pay off the card balance if you keep paying only the minimum payment.
2. Make room in your budget
Now that you know how much you want to pay, take a look at your budget to find the money. Of course, you must continue to manage the repayment of other household debts and bills. If you can cut expenses like entertainment, food, or gas, you could use the money you saved to pay off your credit card balance. Here are some ideas to help you make room in your budget:
- Use coupons and compare flyers to reduce your grocery bill.
- Plan meals for the week and build your grocery list from these ideas to reduce your food waste .
- Order take out only if you can find a coupon.
- Walk or cycle instead of always thinking about taking the car.
- Try to make the gifts for your friends and family yourself.
3. Automate your payments
Once you know how much money you can pay on your credit card, set up automated payments from your bank account. If you automate your payments, you don’t risk unintentionally forgetting to pay off your card balance within a month and paying higher interest charges than expected. When it comes to paying off debt, automation can be your best bet.
Tip: Set up your automated payments to be made on the day you get paid – this will transfer the money to your credit card before you even have a chance to spend it.
4. Consolidate multiple cards
If you have an amount owing on more than one credit card, it might be best to consolidate your credit card debt and get started on a good footing. Consolidation is when you transfer your outstanding debt to a single loan or to another credit product, such as a line of credit. Ideally, this will switch to a lower interest rate or a more structured and easier to repay payment plan. This allows you to immediately pay off your credit card balances and any other unpaid debt, freeing you to focus on paying off the consolidation loan .
What is wrong with the minimum payments?
While minimum payments can come in handy when you run out of cash in a month, they don’t allow you to pay off your debt. In fact, minimum payments can easily do the opposite and put you in more debt. For each credit card statement, you are given a “minimum payment,” which is usually a fixed amount (for example, $ 20 or $ 25) or a percentage of your owed balance (1% or 3%). However, this amount is probably not enough to pay off your credit card balance and can easily hurt you.
For example, on a $ 300 credit card bill, you might only have $ 30 to pay. This leaves a balance of $ 270 on which you accumulate interest. If you spend an additional $ 300 the next month (bringing your total debt to $ 570 plus interest), then your bill may show a payment due of $ 60. However, once again you are a long way from being able to pay off the full balance on your credit card. This vicious cycle can easily continue unchecked until your credit card bill demands immediate attention.
With these four steps, you can focus on paying off your credit card bills and feel relieved that you can say goodbye to the vicious cycle of debt. If you want to get a debt consolidation loan, find out how much you could borrow