Do you have credit card debt that you want to pay off quickly? Well, you're not alone. In fact, more than 45% of Americans currently have a credit card balance, and according to Ben Woolsey, director of marketing and consumer research for CreditCards.com, the average amount of debt per household is $15,956.
Millions of Americans in their late 20s and early 30s will be outlived by their credit card debt, so it's time to take charge now. If you have credit card debt, then there are several simple steps you can take to eliminate it in less time.
1. Pay Off the Highest Interest Rate Card First
Invest any extra cash you have every month into paying off your highest interest rate card, while still paying the minimums on your others. Once you've paid off your highest interest rate card, begin applying all your extra cash to the card with the next highest rate, and continue paying the minimums on the remaining cards. Each time you pay off a card, you will be left with a little more extra cash every month, which you can invest into the next card you're paying off, creating a positive payment snowball effect.
Paying off the highest interest card first is the fastest way to eliminate your credit card debt and reduce your monthly interest fees. But if your goal is to pay off a single credit card as quickly as possible, then you'll want to attack the card with the lowest balance first. This can also leave you with a huge feeling of accomplishment knowing that you've paid off one of your credit cards in full. On the other hand, if you're trying to boost your credit score, then you'll want to pay off the card with the highest utilization rate first. The utilization rate is simply your overall card balances divided by their credit limits. The lower your utilization rate is, the better your credit score is.
2. Get Organized
Make a spreadsheet detailing which cards you have, how much debt you have on each, and their interest rates. You'll also want to know what your total amount of debt is, and make a game plan on how you'll begin paying it off. You won't be able to tackle a problem if you don't know what you're dealing with.
3. Set a Budget
Make a budget detailing what you spend. Are there areas where you can save money? This extra money can be used to pay down your credit cards even faster. Whether you are dining out less, downgrading your cable service, going easy on the A/C, or cutting unnecessary luxury expenses, do what you need to do to reduce your spending.
4. Request a Lower Interest Rate
Call each credit card company and request a lower interest rate. Lower rates can mean lower monthly payments and fees, so every payment will pay off more of the principal. If you have good credit or you've been offered a lower rate by a competing credit card, make sure to mention that to the customer service rep.
5. Make Two Minimum Payments Per Month
Making two minimum payments every month can be your key to living debt-free in no time. Each time you make a payment, your average daily balance is reduced, which results in lower interest charges. This will result in paying off debt at a much faster speed and can also help boost your credit score.