Persistent debt is a common problem for millions right now, or at any time. And the debt can have a terrible effect on mental health and stress levels. And restrict what you can do in your life. So it is important that anyone with such debts does what they can to lessen or eradicate what they owe as soon as possible. So we took a look at how to pay off credit card debt.
Utilise Savings
As a rough average, credit cards charge around 20% interest on any balance you may have. That is a huge amount of lost money, for nothing in return. And all money that could have been used to pay off the debt itself. So there is no point having savings and credit card debt at the same time. The only plausible reason is if your debt is not attracting interest charges due to an offer. So if you have both, pay off your debt. Once your debt is clear, you can then plan building up some savings.
It’s excellent financial sense to have access to cash funds for unexpected bills or a treat, But if you possess credit card debt, then that should always be your priority. A £1000 debt will cost you over £16 a month in charges at average rates.
How To Pay Off Credit Card Debt – Transfer debt
As alluded to above, there is an option if you are not in a position to pay off your debt. A 0% balance transfer card permits those with debt to transfer it to a new card that will not charge interest rates. Charges will begin once the introductory offer period expires though. And there will usually be a one-off charge for doing this. Usually it is a set percentage of the amount you move across. It is still well worth it though for larger amounts, if the set charge is less than the interest you would pay over the interest-free period. It allows you breathing space to get debt paid off. Some card suppliers offer very long interest-free periods nowadays, giving you lots of time. Perhaps up to two years in some instances.
How To Pay Off Credit Card Debt – Obtain a low rate, long-term card
If you’ve got large or multiple credit card debts, or don’t have the credit rating to get a 0% card, you should look to consolidate your cards at a lower monthly interest rate. This could be around 5% or 6%, a significant reduction from the rate you’re currently paying. For example, a £500 debt at 6%, with £25 month payments, will cost £27 in interest – £68 less than keeping it on a 19% card.
Use a 0% Purchase Card
Another way round interest charges is to make new and future purchases without having to pay for what you purchase there and then, and without interest charges for a set period. To put it another way – you buy £1000 of food and other essentials over a few months, without paying for the items yet, nor attracting charges. You can then use the £1000 you did not have to pay upfront to reduce your other debt. And again this method gives you breathing space to pay off everything you owe.
Extra Income/Lower Costs
Easier said than done. But when you distil down how to pay off debt to its purest form, you have two simple options. Earn more, so that you have more money to pay off debt. Or lower your existing costs and expenses away from your debt so that you have more disposable income to pay off your credit cards.
