If you understand how interest rates work on your credit card, you can make three simple adjustments to your credit card use (including how you make payments) that will help you pay off your credit card debt sooner.
1. If you carry a balance, stop using your card for new purchases.
If you carry a balance you have no grace period. Your daily balance increases and you will pay interest on these purchases until you pay them off.
Want another reason to stop using your credit card while you pay it off? Some credit card companies will charge you interest for one more month if you carried a balance into the month, even if you paid your credit card in full at the end of the month. For most people working to pay off credit card debt, this will only matter on their final payment. Make sure you talk to your credit card company or review your statement if this applies to you. You may be hit with unexpected interest on your previous month’s purchases if you are still using your card for new purchases while you carry a balance.
If you take advantage of any low introductory or balance transfer offers, read the fine print carefully. Some credit card companies will offer low introductory rates but charge a second, even higher interest rate, on new purchases. This leads us back to our recommendation that if you are carrying high balances on your credit cards and want to bring those balances down, you need to stop using them for new purchases, period.
2. Make payments sooner and often.
You don’t have to wait until your due date to make a payment. Every time you have excess cash that can be applied towards your credit card debt, make a payment. This will reduce your monthly interest costs, which will help you pay off your debt faster.
3. Create a convenience card not a credit card.
If you owe money on several credit cards make it a priority to pay one credit card off completely first. Now you can use the fully paid off card for a ‘convenience’ card, while you pay off your other card debts. Of course, this only works if you have the discipline to keep your convenience card paid off each and every month.
Paying off credit card debt on your own takes discipline and sometimes even that won’t work. If you think your credit card debt is more than you can handle, talk to one of our experts about your other credit card debt relief options. Contact an advisor today and book your free consultation.