Whether you have gotten swept away with your spending since school started, or getting back into the regular work grind is killing you – I know a few people could probably use a little help making that credit card balance a little smaller.
So, instead of piling on the debt, let’s follow the next 5 steps to shrink your credit card balance:
Always pay your bill and pay it on time
Not only does it seriously hurt your credit rating when you miss a payment or make a late payment, but you will also incur a late charge. While it make seem inconsequential, (what’s another $30 on a balance of $2500, we tell ourselves) those fees do actually add up. Another fee that can add up fast is a weekly over limit fee, which is typically at least $25, and is applied every week you are over your credit limit.
Just think about this for a second: would you buy a $30 T-shirt once a week, or would you balk at spending that amount? If you wouldn’t spend it on an actual item, you certainly shouldn’t be giving it to the bank or lender.
Always pay more than you add in interest
This is a tough one as many of us see that $50 minimum payment, and think, “Oh good, I can still have some spending money leftover if I just make the minimum payment.” We have a reality check for you: nothing, not even your daily coffee, is worth credit card debt. It is preferable to pay off your balance every month, which is not only good for your credit, but much easier to manage than paying down a $5000 balance while you are still using the card. If you cannot pay off your card in full, at least pay as much as you possibly can towards your balance.
Always pay off the highest interest cards first
It’s almost never a good idea to have a several cards on the go, especially with more than one carrying a balance, but life happens. If this is the case, apply more cash to the card with higher interest and higher balance.
Many of us pay down the smallest balance first to get it out of the way faster, but if it comes down to a low interest, low balance card versus a high interest, high balance card it is better for your overall debt to pay the high one off first.
Always calculate your payments based on your current interest rate
This one may seem a little too obvious, but I’m certain we’ve all had at least one experience where we thought our interest rate was something it wasn’t. Very rarely does your interest rate stay stagnant from when you signed up for the card until present time. Make sure your interest rate hasn’t gone up, and if it has, adjust your monthly payment accordingly.
Again, this is another reason not to make just the minimum payment. The credit card company wants to charge you higher interest for a longer period of time. Minimum payments are not designed to help you become debt free.
Negotiate lower rates
If your rate has gone up since you signed up for the card, call your credit card lender and tell them you are shopping around for a lower interest rate. See what they can do for you.
If you are serious about paying off your debt and limiting your credit card spending, you can always talk to your bank about transferring your balance to a lower interest vehicle, such as a line of credit. This could be useful if you have trouble not using your card.
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Have you come out the other end of credit card debt? We’d love to hear your stories of triumph over debt! Feel free to comment below or share your thoughts via social media.
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Do you need help getting out of credit card debt? Don’t hesitate to call the debt negotiating experts at Parley Consulting to get started on your path out of debt. 780.722.3000