Are you losing sleep at night afraid to open your monthly credit card statements? You are not alone! According to CreditCards.com
, “Nearly 1 in 5 Americans ages, 18-24 qualify themselves as being in “debt hardship.”
Credits cards are a great way to create and build your credit score. Without a credit, you can’t rent an apartment! Although it is necessary, unfortunately, establishing through credit cards is an easy way to fall into debt. It might have taken you months to put yourself in credit card debt and the painful truth is, it will probably take you double the time to pay down the debt, but don’t worry here are 5 tips to get you started on paying down that credit card debt:
#1 Stop using your credit card!
The more you use your credit card, the higher the debt plus interest applied to that debt. As the debt increases, it can also lower your credit score. In the meantime, pay for necessities with cash or your debit card. It is harder to depart from cash than plastic but this method will keep you focused on paying off that debt and increase your credit score too.
#2 Don’t use more than 30% of your credit card limit.
A good rule of thumb for using your credit card is staying within 30% of the credit limit. For example, if your credit limit is $5,000, you should stay under $1500 usage on your card. This ensures 1) that you keep the debt manageable and 2) shows responsible use of your credit to the credit bureaus.
#3 Negotiate a lower interest rate on your existing credit cards
Call your credit card company and explain to them you are planning to make a big purchase but need the interest rate do be lowered. Don’t forget to add, that if they cannot accommodate this request, you plan to use another company. Becuase they want to keep your business they will most likely negotiate a lower interest or a 0% promotional rate.
#4 Transfer balances to a 0% with a small 3% one-time transfer fee
If the current rate can’t be negotiated to a lower interest AND if you don’t have too many cards, say more than 2, you might want to consider transferring your balance to another credit card. You will want to take advantage of a card with a promotional 0% interest with a transfer fee of 3 to 5% which can make a big difference in paying down your debt.
For example, if you have a card at 18.99%, opening another card at the promotional rate of 0% for 24 months can make the difference in chopping down the principal payment of your high-interest credit card. Check out Bankrate.com
for a list of best credit card promotion rates.
WARNING! Make sure you read ALL the fine print if the promotional period for the 0% interest says 24 months, make sure you pay as much if not all your debt down before the introduction rate rises to its normal interest rate.
#5 Apply your minimum payment from the first card onto the following card once the first one is paid off.
You want to always pay at least the minimum on time of every month. If you can afford to apply more to the payment you can pay it down much faster. Check out the video on part 4
of the Financially Savvy Friday Series
for how to do this.
Credit card debt can be scary, but the good news is that you can pay it off if you stay disciplined and focused. At the end, you feel accomplished for conquering this goal.
Do you find yourself in credit card debt? What are some methods you use to pay down your debt?
Do you have any rules for using your credit card to prevent debt?