In a perfect world, we wouldn’t have credit cards. But, sadly, most of us do. And most of us are paying on them with the light at the end of the tunnel and very long way away.
Here are some tips for getting rid of that debt faster and saving on your credit card interest, because the more you can save on the interest, the faster you can pay down the principal.
- Make payments on time, every time. You want to stay in good standing with your credit card company. The you can:
- Negotiate a lower interest rate. “Negotiate” makes it sound like it’s hard. Basically, you call your credit card company and ask if you are eligible for a lower rate based on your history. You should be able to get your rate lowered a point or two.
- Take a no interest offer from another creditor. This can be tricky, so be extra careful. But you may be able to find a credit card company that is willing to take on your credit and offer you a promotional APR. Sometimes as low as 0%. Other times it may be 1-2%. If you’re good at understanding jargon and reading the fine print, sometimes these offers can benefit you. As long as the amount you are transferring is low enough that you can pay it off within the promotional period. If you don’t then you could be subject to a ridiculously high interest rate and sometimes even back interest. So, tread carefully, but if you know how to play it, it could come out in your favor.
- Pay more than the minimum balance! This is important because sometimes the minimum balance barely clears the interest you are charged each month. Which means very little of what you pay actually goes toward the debt.
- Pay off the balance with the highest APR first. If you have multiple cards, one way to save on interest is to start with the card that’s costing you the most interest. In this case, you would just pay the minimum balance on your other cards so you can throw as much as possible each month to the card with the highest APR. Thus paying down more of the debt each month and saving on the interest that you would have been charged on a higher balance.
- OR Pay off the lowest balance first. This is good if you are an impatient person that wants to see the fruits of your labor right away! Say you have a card with $500 on it with a fairly low rate and you have a card with $3000 on it at a higher rate. Do what you can to put $250 towards the $500 balance this month and again next month (even if it means only paying the minimum on the other balance for just two months). Then in two months, you’ve eliminated one creditor! And guess what? You should be able to increase what you are paying on the $3000 balance by a couple hundred dollars a month!
Anyone have any “get out of debt” strategies? I’d love to hear how you did it and even share your stories on the blog!
We’re working on getting out of debt right now ourselves!