1. Step away from the Visa.
It sounds obvious, but your first step is to stop swiping. After all, it’s tough to make progress when you keep adding to your balance.
Take your card out of your wallet to remove temptation, but think twice before you close the account—especially if you’ve had it a long time—as this could have an adverse effect on your credit score.
2. Inch your payments up each month.
Next, revisit your budget for a clear picture of how much you can realistically dedicate to credit card debt repayment above the minimum. Look through old bank statements for blind spots where you may have been wasting money (like out-of-network ATM fees, say, and subscriptions you no longer use). Analyze areas of spending where you can scale back or push off purchases, then redirect those savings toward paying down your debt.
And assess your debt, including interest rates and minimum payments. Knowing these numbers can help you create the most cost-effective repayment strategy, which is generally attacking the balance with the highest interest rate first, then working your way down the list (while paying at least the minimum on other balances, of course). But before you settle on a strategy…
3. Research balance-transfer offers.
Kate Hao, founder of HappyMangoCredit.com, a site that connects consumers and lenders, recommends contacting your bank or credit card company first to find out if they can offer you a break. “Explain you want to pay off debt, and develop a plan with them,” she says.
They might lower your rate or hook you up with a new, lower-rate or 0-percent-interest card to which you can transfer your existing balances. If you’re aggressively wiping out debt, this can be a big boon.
Remember our $16,000 debt example? Let’s say you transfer that balance to a no-interest card and pay $480 a month, which is 3 percent of the original total. Even if the rate spikes to 17 percent after 18 months, when you’d paid all but $7,360, it’d take just three years to pay off the total balance at that rate—and you’d fork over a little more than $1,200 in interest.
Even if your bank won’t play ball, you can search for attractive offers. Depending on your credit, you may be able to qualify for credit cards that offer favorable interest-free allowances and other terms.
Whichever you choose, remember to read the fine print to make sure you’re not surprised by transfer fees and can, ideally, set a budget that allows you to pay off the balance before the interest jumps.
4. Consider a personal loan.
A final option for zeroing out credit card debt is transferring it to a personal loan—a strategy credit expert John Ulzheimer says may not actually translate to dollar savings, but is likely to improve your credit. That’s because revolving debt, like card balances, is more harmful to your score than installment debt, like personal loans.
“In the most extreme cases, someone’s score could improve by triple digits, but for most, it would range from the low double digits to mid-high double digits,” says Ulzheimer.
And with an improved FICO score, you can nab a better rate down the road on a more worthwhile loan, like for a car or mortgage, and save money on that interest, he points out.
Talk to your us about our credit audit and a information session to give you the information in more detail.
5. Once you’re debt-free, charge sparingly.
This may seem obvious, but it’s easy to overdo it once you start using your credit cards again. An easy way to stay on top of it: Charge only what you can pay off each week. That way you’ll be more likely to check yourself before you swipe. And paying it off weekly will also keep your balance low compared to the total credit available, which can help keep your credit score up.