If you’re looking to pay off credit card debt faster, this article is for you!
At the beginning of the year, we’re typically filled with hope and motivation. We make New Year’s resolutions to show up as our best selves and dive head first into our goals.
The average American holds $5,700 in credit card debt, with more being added in the later months of the year due to Christmas. While credit cards aren’t intrinsically evil, credit card debt is INSANE because of high interest rates, an average of which is 14.52%.
Here are 5 ways to pay off credit card debt faster if you’re looking to take on that challenge and become credit card debt free or to pay off a significant portion of your credit card debt.
1. Create and follow a budget
Paying off your credit card debt faster isn’t just going to happen on it’s own. You have to be intentional about accomplishing this goal, and what better way to do that than focusing your budget on this very challenge?
You can create a budget by using a zero-based budget. What is a zero based budget? This is a budgeting method where you write down every single expense. Once that is completed, you write down all of your income. You subtract all your expenses from your income and what you have to put towards saving money, paying off debt and investing to build wealth (aka you have “zero” left at the end of the month).
In this budgeting scenario, you would put your remaining amount towards your credit card debt to pay it off as quickly as possible.
Not sure how to budget? My signature program has an entire module on budgeting (and debt payoff)! Through my Flourish FinanciALLI Coaching Program we will uncover why you have certain money habits, how you can still treat yourself while paying off debt, how to make your money work for you and more (12 modules + coaching calls).
2. Choose a debt payoff plan
If creating a zero based budget and using all your “leftover” money doesn’t exactly work for you, you can choose a debt payoff plan that will pay off your credit card faster.
If you need to pay off other debts before you tackle your credit card debt, using these methods can be helpful (or if you have multiple credit cards you can choose between these methods).
There are 2 debt payoff plans that I typically use and recommend for my clients
- The Debt Snowball Method
- The Debt Avalanche Method
The Debt Snowball Method is more of a psychological method. It is designed to allow you to pay off small debts quickly which gives you more motivation to pay off larger amounts of debt down the line. With the Debt Snowball Method, you list your debt from lowest to highest, disregarding interest rates.
Once this is complete, you create a zero-based budget and use the remaining monthly amount on the lowest debt. You keep paying on that lowest debt until it is completed, then you move to the next lowest debt, using the remaining monthly amount, plus what you were paying on the first lowest debt.
The idea is that you build momentum and eventually have enough money to pay off debt quickly.
The Debt Avalanche Method is all about paying off debt to save you the most money in the long run. With the Debt Avalanche Method, you list your debts from highest to lowest interest rate, regardless of total amount owed.
Once this is complete, you create a zero-based budget and use the remaining monthly amount on the debt with the highest interest rate. Once you pay it off, you move to the debt with the next highest interest rate and so on.
This is probably the method you will want to use if you have high interest credit card debt and you want to pay it off as quickly as possible.
3. Make more than the minimum payments on your credit card
Maybe you are just getting onboard the debt payoff train and you don’t exactly have a plan. At the basic level, paying off your credit card faster isn’t going to happen unless you pay more than the monthly minimum payment.
Budgeting can be difficult if you’re on an inconsistent income, work through commission, or have unstable employment due to COVID-19 consequences. That’s okay, because no matter your situation, putting more than the minimum payments toward your credit card debt will pay it off faster.
One of the best tools I recommend is a credit card debt payment calculator. With credit card debt calculators you can toggle different situations and see how much interest you can save by paying your credit card off early.
4. Pick up a side hustle and put your income towards your credit card debt
You may consider picking up a side hustle if you need additional invoice to pay off your debt.
Now, there are about 1,000 different side hustles that you can have to pay off debt faster. I decided to make an extra $500-$1,000 per month flipping items My biggest piece of advice when it comes to side hustles is to consider your safety and health before diving in. If a side hustle isn’t safe or harms you, physically or mentally, it is not worth the extra money to pay off your credit card faster.
5. Consider a balance transfer
Credit card balance transfers are last on this list because they are a controversial topic and not an option that every person can handle.
If you are dedicated to paying off your credit card debt but feel like all of your efforts are going to interest payments, a 0% APR credit card balance transfer may be the best option for you.
A balance transfer to a card with a much lower interest rate, ideally 0% APR, means that your payment will be going mostly or totally toward paying off principal. Instead of most of it going toward interest.
We had around $11.4k of credit card debt and the interest rate was 18.99%. We knew with interest it would take us a lot longer to tackle that amount, so we opted to do a credit card balance transfer.
If you’re considering a balance transfer to pay off credit card debt faster, check out my blog article, ‘Should you Do a Balance Transfer’ today.
Was this article helpful? Do you have any other ways to pay off credit card debt that I should include?
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