Credit cards can be an ideal way to make sure that you have enough money available for necessities and emergencies. However, credit card debt can be notoriously difficult to get out of, especially if you have a large credit card balance or several cards. If your balance is bigger than the amount of money that you have available to spend on your credit cards, it can feel like an impossible task to try and get yourself back to a point where your balance is zero.
The good news is that you don’t have to completely clear all your credit card debt for it to have a positive impact on your credit score. As a general rule of thumb, your balance should be no more than one-third of your credit limit at any given time, across all your cards. So, if you have three cards with a limit of $1000 each, then you should only have a balance of $1000 across all of them at any given time. So, how do you get there? Here are some tips to get you started.
Consolidate the Debt
First of all, consolidating your debt can be an ideal way to make it more manageable. This includes getting another credit card or a loan that you can use to pay off the balance of your credit cards, and then repay the loan or credit card that you used to do this. It’s a good choice if you have several credit cards and are struggling with making multiple payments each month. With debt consolidation, all you need to do is make one payment once you have cleared the balances. This option can also be cheaper over time, as you can find a lower-interested loan to consolidate the debt or use a credit card with an interest-free period. You should only consider debt consolidation if you are planning to clear the balances of your credit cards completely, as otherwise, you could end up making even more payments each month.
Balance Transfer Credit Cards
Transferring the balance of your credit card to a card with a lower APR or an interest-free period is a good idea if you want to reduce or clear your credit card debt. Credit card APR refers to the interest rates that are charged on your credit card balance. What is APR credit card? APR credit card is a percentage that is charged when you make your repayment each month based on your balance. The exact amount that you pay will depend on your card balance.
The lower the APR, the less interest you will need to pay on your credit card balance, so it’s a good idea to transfer the balance of your card to one with a lower APR, if possible, as this means that overall, more of your monthly payment will be going towards actually clearing your balance. You can also find some credit cards that offer an interest-free initial period, usually for three or six months. Transferring your balance to this kind of card can be a wise idea, as this gives you some time to make the most of repayments by ensuring that every cent goes towards your balance rather than interest payments.
Start with the Smallest Balance
The debt snowball method can be an ideal way to repay your credit cards and reduce or clear your balance if you have a few cards. Start by repaying as much as you can to the credit card with the smallest balance while making the minimum payment on any other cards that you have. Once the smallest balance has been cleared, move to the next one up in size and begin paying the money that you were previously paying towards your smallest balance credit card towards this one. Continue doing this until you reach the credit card with the largest balance. At this point, your other balances will be cleared, and you’ll have more free money to pay towards it until all your balances are paid off.
Start with the Biggest APR
Another debt repayment strategy that you can use to repay your cards if you have several is known as the debt avalanche method. This method works in a similar way to the debt snowball method, but rather than beginning with the smallest balance, you will pay towards the card with the biggest APR first, regardless of the balance. Pay as much as you can towards this card each month while continuing to make the minimum payment on any other cards you have. Once the card with the biggest APR’s balance has been cleared, move onto the next one, working your way down until you finally repay the card with the smallest APR.
Strategies for Avoiding Unmanageable Credit Card Debt
Whether you have recently been accepted for a new credit card or have just put in a lot of work and effort to repay your credit card debts and want to avoid getting into a sticky financial situation, there are lots of strategies that you can use to prevent unmanageable credit card debt while still making the most of the credit that is available to you. Also, in States like Washington, there are simple ways of getting out of cycles of debt with Washington debt relief solutions that are available to help you with budgeting and financial management so that you can stay on track with your finances.
Think Before Buying
Credit cards can often encourage impulse buying – if you really want something, then it can be tempting to put it on your credit card and worry about paying it back later. But while this might not cause too many issues if you do it from time to time for a couple of purchases that you know you are going to be able to afford to repay, it can lead to serious credit card debt if you do it a lot. Before buying, it’s a good idea to take some time to think about whether you really want or need the product. It’s also worth considering if you can afford to pay for it in cash, rather than using your credit card.
Repay in Full
Making a commitment to repaying your credit card in full each month will not only help you avoid overspending on your card but also improve your credit score. Repaying your credit card in full each month will keep your balance low and prevent you from racking up debt that you might struggle to repay in the future. Go through your budget and consider how much you can afford to pay back to your credit card each month and set yourself this as a limit for credit card spending.
Use Your Card for Necessities
If you are mainly wanting to use a credit card to improve your credit score over time, then it’s a good idea to keep your credit card for necessities only. When you only use your credit card to buy items that you would have purchased anyway, like groceries or gas, you will find it easier to repay the balance and avoid getting into debt. If you have the money available that you’d normally be using to make these purchases, then you can make a payment to clear the balance straight away.
Credit cards are undoubtedly handy to have. However, getting into a lot of credit card debt can be a sticky situation. Whether you’re dealing with credit card debt or want to try and avoid it in the future, keep these tips in mind.
