Pay off Your Credit Card Debt Now
Credit card debt can cause lots of stress and anxiety and for those that have lots of debt, owing money to credit cards can stop you from either saving or purchasing things that you really. In many instances, credit card debt can creep up on people unnoticed. In the course of only a few months, a balance on a credit card can go from a couple of hundred dollars to several thousand, causing the monthly payments to swell enormously. If you are racked with credit card debt, here are some tips to pay them off immediately.
Never Pay Just the Minimum
Credit card companies are in the business of keeping you in debt. In fact, the credit card companies profit the most when you only pay the minimum payment. The reason being is that the minimum payment usually only covers the interest on the principle- meaning that by only paying the minimum, you could end up paying two to three times the amount of the original debt. Usually the minimum payment is about 3% to 5% of your total debt on the credit line; however, make sure that you pay as much as possible. 10% each month is a good target, this way you can usually get rid of your debt in about a year’s time.
Choose Between Savings and Credit Card Debt
It might sound crazy, but if you have a large debt rung up on credit cards and you have savings in the bank, you may want to use your savings to pay off your debt. While it is always a good idea to have a small nest egg in case of an emergency, for most people saving several thousand dollars in the bank (usually making from 1% to 5% interest annually), you could save yourself hundreds or even thousands of dollars by paying off your debt. For instance, if you owe $5,000 in credit card debt at 16% interest, and have savings of $5,000 making 3% interest annually, you are actually losing 13% of your $5,000 annually just by not paying off your debt.
Debt Consolidation Loans
Another way to pay off credit card debt quickly is to take out a debt consolidation loan. It might sound fiscally irresponsible to take out a new loan to pay for older loans, but in fact, consolidation loans are extremely beneficial. A credit card consolidation loan works by taking out a new loan, one with a lower interest rate and a fixed term while paying off high interest credit card debt.
For instance, say, you have three credit cards all with an average of 15% annual interest and a total debt of $10K; you can take out one consolidation loan for $10K at an interest rate of 9% for five years. In doing so, you can pay off all your debt and save money on the total cost of interest. A consolidation loan can literally save you thousands of dollars over the life of the loan.
