Tired of feeling as though there’s an ever-present cloud of credit card debt looming over your head, following your every move, taunting your every purchase? Credit card debt is a major issue facing millions of Americans today. Last year, a Bankrate.com study reported that one in four people have more credit card debt than savings. In this two-part series, we’ll share eight tips for ridding yourself of credit card debt once and for all.
Here are PFCU’s first four tips:
- Stop acquiring new debt. If your debt is not in control, the last thing you want to do is keep acquiring new debt. Often times people try to open up new credit cards as a way to “start fresh,” especially if the new card has a lower interest rate. Not the case. You’re simply transferring your credit (and debt) from one card to another. Even if a card has a low interest rate, you’re still losing money every month when you carry a balance on that card. Plus, multiple applications made at the same time to open new credit cards can actually hurt your credit score.
- Try to pay more than the minimum balance if you can afford it. Otherwise, you’re just paying off interest and, over time, it adds up. By only ever paying the minimum, your balance is barely shrinking and can actually grow due to further spending and high interest rates.
- Cut. It. Up. Cut up your credit card so you don’t give yourself the option of using it. This is one of the easiest things you can do to cut down on credit card debt – by not allowing yourself to build any additional debt through overspending. It is important not to cancel the card entirely, because as long as it still has a balance on it, you are responsible for paying it off. In addition, it’s important to read the fine print – canceling a card could drastically affect your credit score, especially if it still has a balance.
- Begin paying off your credit card debt. Generally, you want to try to pay off the highest interest credit card first because that will save you the most money in the long run. But if that’s not possible, you can choose to do the “snow ball effect,” which refers to paying off your lower balances first, as these are easier to achieve and quicker to see positive results. The more balances you pay off, the higher your credit score becomes.
Come back and check out MoneyLine next week to learn four more tips for paying off credit card debt.