Credit card debt doesn’t have to keep you from fulfilling your financial goals.
Not all debt is bad. Mortgage and auto loans are often necessary, but credit card debt can be sneaky – it usually starts small and gradually increases. Over time, your card balance may feel overwhelming, like you’ll never be able to pay it off. Thankfully, there are strategies you can use to start reducing this debt that can threaten your long-term financial security.
Control your spending.
You can’t control the interest rates on your cards, but you can control how much you spend. Limiting overspending means making hard decisions. If you can’t pay cash or pay your credit card balance every month, you probably shouldn’t spend the money.
Pay off as much as you can.
If you already have significant balances on your cards, it’s important to pay more than the minimum monthly payments. You’ll shrink your total balance faster and pay less interest over time.
Set up automatic payments.
Missed credit card payments often come with late fees that only add to your debt. And worse than that, missed payments can cause a significant hit to your credit score. Set up automatic payments to get rid of human error and the potential for missed payments.
Snowball Method.
Using this debt reduction strategy, you’ll pay off your smallest debt first. Make minimum payments on all other forms of debt while paying as much as you can on your smallest balances. Once cleared, roll those payments into the next smallest debt, and continue snowballing until all your balances are paid.
Avalanche Method.
Target cards with high interest rates since they cost the most in monthly interest charges. Make minimum payments to all other debt except for cards with high interest rates. Pay as much as you can on those cards since their debt is the most financially crippling.
It typically takes far more time to pay off credit card debt than it does to accumulate it, and besides that, it’s generally less fun. Focus on implementing these strategies to start creating a more stable financial future. We’ll continue to work on strategies to create a financially secure future. As always, contact the office if you have any questions or would like to discuss further.
Source: Steve Lindquist – gbfinancial.org
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