Paying Off Credit Card Debt can seem like climbing Mt. Everest.
The more you try to pay off your debt the top of the debit mountain seems so far away.
Experts offer many different ways to tackle this task.
I recently came across this article that gives you 6 options into paying off your credit card debit.
Let's look at each one to find out the pro's and con's of each option.
"Are you facing monstrous credit card balances? Unfortunately, there is no quick-fix solution to get out of debt, despite what solicitors or infomercials might have you believe."
Source Yahoo Finance – 6 Ways to Pay Off Credit Card Debit
| A Debt Reduction Breakdown | |||
| Technique | Pros | Cons | Who it's good for |
| Debt snowball method | Get motivated every time an account balance reaches zero. | On paper, it's not the most financially sensible. | Those motivated by small successes. |
| Balance with highest rate paid first | You'll save more over time. | Must be very focused, and stick to a rigid payment plan. | Those motivated by interest savings. |
| Balance transfers | Will allow you to save on interest, so you can pay off the principal faster. | Opening a new account can hurt your credit score in the short term. | Determined risk-takers. |
| Savings-focused | "Rainy day" money means you'll be prepared when emergencies arise. | Savings account interest is less than the interest on your debts. | Potential layoff victims. |
| Debt payoff-focused | The feeling of relief that comes with a clean slate, and an improved credit score. | If an emergency occurs and savings cannot cover it, you may be forced to borrow. | Anyone who's consumed by their debt. |
When using any of these 6 methods you must determine which method is best for you. Before any of these methods are used a persons mindset toward credit and finances has to change. When there is no change in mindset the debt situation will return and be much worse than before.
1. Debt Snow ball to payoff credit card debit. I don't agree with this method. You will pay more interest on accounts with a higher interest rate.
2. Highest interest paid first when paying off credit card debt.
I recommend this method to my clients trying to improve their credit score. The article also talks about lowering your debt utilization. The lower the debt utilization the better your score.
3. Balance transfer when paying off credit card debt.
When you apply for new credit your credit score will initially go down. Once you have a positive pay history your credit score will recover.
Depending on the offer you pick for the balance transfer for lower interest rate. You will need to payoff the balance before the offer expires. You also need to cut up the cleared credit card to keep from being tempted to charge up more debt.
4. Keep the debt where it is when paying off credit card debt.
Remember that with a transfer the debt has not disappeared. You still have the debt to pay. If you are unable to payoff the debt during the promotional period you could end up with a higher interest rate than you started out with.
5. Grow your emergency fund when paying off credit card debt.
Whether your paying off credit card debt or not saving money in your "life happens" fund or emergency fund is great idea.
Saving can keep you from having to put debt on your credit cards. End up paying off credit card debt later.
No matter which of these plans you choose paying off credit card debt will not hurt you in the long run.
Once your credit cards are paid down or off only charge what you can afford to payoff when the credit card statement comes.
Are your paying off credit card debt?? Or are you just piling on the debt???
Your financial coach,
Renee Lawson
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