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By Shiv Nanda
Special to the Financial Independence Hub
Credit cards are great, aren’t they? We can use them to pay bills, buy stuff online or in stores, and travel, even if money’s tight right now. Of course, the ability to buy now and pay later also means it’s easy to get carried away and spend more than we can actually afford!
Many of us have racked up huge credit card bills, and paying them off seems impossible sometimes. If you’re in the same boat, don’t despair. We’ve put together some great tips to help you pay off credit card debt faster.
Here’s what you should do:
1.) Avoid the Minimum Payment Trap: It’s tempting to pay just the minimum due every month, especially when it means paying only a few extra dollars in interest charges.
But have you ever thought about how much this adds up to? Total up the interest you pay in one year, and you’ll know why everyone advises paying in full every month. If full payment isn’t possible, pay as much as you can. It’ll significantly reduce the interest you pay in the long term.
2.) Consolidate High-Interest Debt: Debt consolidation is a good way to reduce the cost of high-interest credit cards, loans and other debt. If you tend to lose track of due dates for multiple cards, it also helps you avoid late payment fees and penalties.
Use a debt consolidation loan or personal loan with affordable interest rates to pay off expensive credit cards and loans, and then make repayments in one place.
3.) Prioritize One Debt at a Time: Speed up debt repayment by focusing on clearing one credit card in full (with minimum payments on the rest). There are two ways to handle this:
- Settle the most expensive debt first: The card with the highest interest rate adds to your total debt faster than low-interest cards do. Reduce your interest burden by settling this quickly.
- Pay off the lowest balance first: Settle the card with the lowest bill. Then, add the money you would have been paying for it to the monthly payment for the next debt you’ve prioritized.
4.) Pro Tip: Use Cycles the Smart Way: Billing and payment cycles for credit cards can actually be used to your benefit. Keep track of when the billing cycle begins, and spend on the card only for a fixed number of days after that date. This gives you a longer interest-free period for each spend.
For instance, if the billing cycle starts on the 5th of every month, make purchases between the 5th and 25th only. A transaction made on the 1st would be billed within 4 days, while one made on the 10th is interest-free for 25 days.
Getting credit card debt under control is definitely possible. All it takes is some careful planning and commitment. Show your debt who’s boss and take charge of it today!
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at shiv@moneytap.com.
