Are you struggling with credit card debt? Follow this advice to start paying it off so you can reduce the level of stress in your life!
Debt doesn’t have to be forever
The average U.S. household has $15,762 in credit card debt, according to NerdWallet. That debt can take a toll on your life and relationships. But it doesn’t have to be forever. It is possible to pay if off.
If the prospect of facing your credit card debt on your own seems daunting, the first thing you need to do is get some professional help. The National Foundation for Credit Counseling (NFCC) offers free or low-cost debt counseling to help you through the process. Visit them at NFCC.org or call 1-800-388-2227 to find a local affiliate office near you.
Once you’re ready to tackle that debt, here’s a strategy for you:
1. Freeze your credit card–literally
To really pay down your debt, you’ve got to stop piling on the charges! So Clark has long recommended freezing your credit card in a block of ice. Fill a large freezer bag (generic brand, of course) with some water, drop your card in and toss it in the freezer. You’ll cut down on impulse purchases this way and learn to live less and less on credit with each passing day.
2. Know the right order to pay down your debt
Once you’re no longer making new charges, it’s time to face your debt head-on. If you have several cards, your first goal is to pay off the card with the highest interest rate. Just make minimum payments on cards that have the lower interest rates, until the card with highest-interest debt has a zero balance. Then you move onto the next card, and so on and so on. One by one, the cards will start falling off your balance sheet as you pay them off.
3. Don’t fall for ‘skip a payment’ offers
Particularly around the holidays, some banks and other credit issuers will let you ‘skip a payment.’ But you don’t really skip the payment; it’s just tacked on at the back end of your outstanding balance due. So it gains additional interest and keeps you in the red even longer.
4. Try the 14-day method
One proven way to pay more toward the card with the highest interest rate — and to get rid of it faster — is to make a separate half-payment every 14 days to the credit card company. Mark your calendar every 14 days and write that check or send your online payment that day. Making a half-payment every 14 days equals one extra month’s payment you’ve made at the end of the year. Work these payments around your statement cycle to avoid paying late fees.
5. Do a hardship debt-management plan if all else fails
The NFCC mentioned above can also help you set up what’s called a hardship debt-management plan (DMP). In the case of a hardship DMP, lenders agree to modify the terms and conditions of their repayment policies. That means they may waive late and over-the-limit fees, in addition to reducing interest rates. They will not, however, agree to a reduction of your outstanding balance. But it could be worth a look if you meet the eligibility requirements. Get in touch with a local affiliate of the NFCC today to find out.
6. Don’t close your credit cards when you’re done with debt
The temptation when you’re debt free is to rid your life of credit cards forever. Many people want to call up their credit card companies and shut down the cards. But that’s a bad idea. If you go that route, you reduce the available credit you have in your life, which drops your credit score. The better plan is to keep your cards open, make a small charge every six months and pay it off in full. By doing that, you’ll boost your credit score over time.