“I buy now, I pay later” is a phrase that we tend to relate directly to the expenses we make with our credit cards. Thinking that we have time for the expenses to be reflected through installments or that these do not make a big difference.
Undoubtedly, paying off your credit card debt requires strategic economic planning. That goes from arranging payments to negotiating with your creditors to negotiate fees if you fall behind on payments.
Paying off debt can be easier than you think
Using a payment control system makes it possible to get out of debt much faster than you think on paper. With the right budget, making conscientious use of them, paying more than the minimum, and being responsible, we can get out of debt easily.
However, the current situation shows that credit card debt is rising. According to the Federal Reserve Bank of New York, in the second quarter of 2022 alone, credit card debt increased by 7%.
There is no doubt that human beings are compulsive consumers, and this theory is more than clear in the case of credit cards. Well-managed credit cards can open up a world of possibilities. But, mismanaging them can lead to bankruptcy.
Now… taking all this into account, how can we get out of debt?
This process takes a lot of organization to be done successfully. A credit card can be expensive, and the average interest rate is around 22%.
That is why we have prepared a series of strategies to serve as tips to help you get organized when paying your credit card debts. All of this is with the intention of getting you out of that hole where you find yourself as soon as possible and reach your desired financial success.
It is highly important that you set realistic goals to meet your budget, especially with these types of transactions, and even more so if you want to decrease debt since you will have to keep on track with each of your payments to meet that goal.
Keeping on track with each payment is highly important since if you do not comply with this, your debt will grow, and the interest rate will increase. For this reason, it is also important to work with your bank to set up a payment schedule that suits both of you.
Create a payment strategy
Common advice is to set a goal of paying more than the minimum monthly payment. This will accelerate the credit process and improve your credit history.
On the other hand, different payment methods can be considered to carry out this process. Such as the snowball method, where you pay in installments that go up in value or consider a balance transfer to a card with 0 APR.
Prioritize your debts
Studying your debts and how they are subdivided into interest rates, installment payments, and balances would be best. In addition to organizing them along with additional debts, you have from other fields.
The importance of these will depend on each person, but organizing your debts in terms of date can be a lifesaver to control your expenses.
Keep track of expenses
It may sound silly, but your debt will never stop growing if you don’t keep track of your expenses. The best strategy for this is to stop using the credit cards to which you owe the most money.
Also, making a basic spending scale might be a solution that works. Organize your priorities, searching for insight into which expenses should be part of the budget and which should not.
Going over budget is not an option; it will only lead to endless debt for you and your credit cards. Strategically planning your expenses and debts will help you generate balance in your economy.
Think about the option of taking out a debt consideration loan
This type of bank loan seeks to combine different debts to include a lower interest value. This is a functional strategy if you have several cards since you will only need to worry about one payment date.
A debt consideration loan also opens the door to saving money on interest. But it may not be the best option for a person who does not have an excellent credit history before the debt.
Consider a balance transfer option
If you maintain a good credit history despite your debt, you may be able to do a credit card balance transfer. This involves transferring all your debt to a new card.
This takes advantage of the discounted interest rate on the new card, which is usually 0% for 12 to 21 months. Sufficient time should allow you to pay off your previous debt, transferring the balances of a higher percentage of interest to it in case there are several debts.
“How to Manage and Deal With Credit Card Debt.” Better Money Habits, Bank of America, https://bettermoneyhabits.bankofamerica.com/en/debt/credit-card-debt-management.
“How to Manage Credit Card Debt – Debt Relief Options | Equifax.” Equifax | Credit Bureau | Check Your Credit Report & Credit Score, https://www.equifax.com/personal/education/credit-cards/credit-card-debt-relief-options/.