There are approximately $1 trillion of credit card debts in America. So, don’t worry you are not alone.
Debt can be a huge drawback to economic and financial freedom. And when you find yourself in a pit of debt, the safest way out is to stop digging.
Although it might seem impossible, it’s very easy for you to live a life free of debt.
Below we outline some strategies that will give you the best way to pay off credit card debt.
1. List all Your Credit Card Debts
Making a list of all your credit cards debt is a great way to start planning on paying off the debts. You can list the debts either in ascending or descending order beginning with the largest going to the smallest or vice versa.
This will give you a clear picture of your total credit card debt. Hence, making it easy to come up with a suitable payment plan.
2. Make Payments to the Debt with the Highest Interest Rates First
After making your list. Make small payments to all credit card debts in ascending order beginning with the debt with the greatest interest rate. This prevents the debt from gaining any additional interest.
Afterwards, make small minimum payments on all your credit card debts. But use the rest of your extra income to make payments to the credit card with the highest interest. After the first debt is cleared, pay the next debt using the same method.
Follow this process until you have cleared all your debts. This is one of the best ways to clear your debts and it is known as the avalanche strategy.
3. Make Payments to the Credit Card Debt the Smallest Amount First
Begin making payments to the smallest amount first. This method is quite popular because it allows people to progressively lower the amount of debt they have using small cash payments.
This method also motivates you to make more payments hence making it easy for you to pay off the rest of your debt. After clearing the small debts, move on to the amounts with larger balances.
The main drawback of this method is that it ignores interest rates. This method is known as the snowball strategy.
4. Clearing Your Debt Using Another Credit Card
You can use another credit card to pay your outstanding debt by transferring the amount you owe to a credit card with very low-interest charges. The interest waiver on the new card is only for a limited period of time such as 6 months.
This method works best for paying off credit card debts with high interest rates. You can learn more about credit card options by visiting your bank or accessing various websites.
5. Taking a Loan to Clear Your Credit Card Debt
After making a list of all your credit card debts. You might find that the amount and interest rate is too high to be paid by making regular payments. You can decide to take a loan in order to pay off the debt provided the loan has a better payment period and lower interest rate.
This method should be used as a last resort because it still leaves you in debt.
The Best Way to Pay off Credit Card Debt
Clearing all your credit card debts will require your commitment and following a solid credit card payment strategy.
Use the tips above to help you choose which method is the best way to pay off credit card debt.