Your guide to paying down credit card debt
...Two common strategies for paying down credit card debt are the debt avalanche method and the debt snowball method...
Credit cards have become an integral part of modern-day life. From day-to-day payments like restocking the fridge, to larger purchases like furniture or holidays, they can be a convenient and helpful tool, helping you spread the cost over a number of months and build a healthy credit score.
Every month, credit card users receive a statement that outlines the balance and total amount owed, with a number of ways to repay. If your balance is cleared in full each month, you won’t have any interest to pay. Any outstanding debts will be charged interest, adding to the total balance.
If used irresponsibly, credit card debt can quickly spiral out of control, particularly if you are only paying back minimum repayments each month. If you’re credit card debts are becoming difficult to manage, it’s important to know you aren’t alone. In this guide, we look at a number of ways that you can pay down your credit card debt and regain control over your finances.
Get a clear picture of your financial situation
While it may seem overwhelming, it’s important to first understand the full depth of your financial situation.
Gather all of your credit card statements and add up how much you owe. Compare this against your monthly income and mark down what you currently repay each month, be it a minimum repayment or fixed amount, and the interest rate for each credit card you have.
You’ll then be able to get a clearer image of which of your debts are a priority and whether you are able to raise the amount you pay each month.
Choose a strategy for paying down your credit card debt
Two common strategies for paying down credit card debt are the debt avalanche method and the debt snowball method.
The snowball method
The snowball method focuses on paying the smallest balance first. Once this is repaid in full, you use the money you were paying for that debt and begin paying the next smallest balance, continuing this with each outstanding card balance
The avalanche method
The avalanche method prioritises paying off debt with the highest interest rates first, minimising the overall interest paid. While this may take a longer time to pay off your first credit card, it can help save money in the long-term by eliminating your most expensive debts first.
Consider a balance transfer credit card
Balance transfer cards are a great option if you have a good credit history and credit score. Many balance transfer cards offer introductory 0% APR offers for a set amount of time which can help pay down your credit card debt without worrying about interest during that time. Consolidating multiple credit card balances onto one card can also help simplify your monthly payments, depending on your credit limit and utilisation.
If you have multiple credit cards with varying interest rates, debt consolidation can be a viable option. This involves taking out a new loan with a lower interest rate to cover your existing credit card balances.
While consolidation can simplify your debt management, it's important to carefully compare interest rates and fees to ensure the new loan doesn't worsen your financial situation.
Seek out professional guidance
If you're struggling to manage your credit card debt on your own, consider seeking assistance from a credit counsellor or financial advisor. These professionals can provide personalised advice and help you create a tailored debt repayment plan that suits your specific circumstances.
Other ways that can help pay down your credit card debt
There are a number of additional ways you can look at to help reduce financial strain and pay down your credit card, including:
- Setting up a monthly fixed sum rather than a minimum repayment
- Dip into your savings to help reduce the overall balance
- Create and stick to a budget
- Cut back on discretionary spending
- Enter into a debt management plan
Paying down credit card debt takes time and dedication. Avoid getting discouraged if you experience setbacks or slow progress. Celebrate your achievements along the way, no matter how small, and stay focused on your long-term goals.
Remember, you are not alone in your journey to financial freedom. Taking the first step towards paying down your credit card debt can often be the hardest, but millions of people every year take back their financial control with perseverance, strategic planning and a commitment to change, achieving their credit card debt repayment goals.