What’s the best way to pay off your high-interest credit card debt?
As you might imagine, there’s no one-size-fits-all solution to get your financial ducks in a row. Debt doesn’t accumulate overnight, and getting out from under it won’t happen in a day unless you win the Powerball.
At Lendah, our mission is to help you find your way back to financial independence and peace of mind. Personal loans are an important component of that goal, but there are other moves that you can make at home to bring your debt down effectively.
4 Ways to Pay Off Your High-Interest Credit Card Debt
Before we get started, we should acknowledge that this isn’t a unique problem. Millions of Americans today are struggling with credit card debt, especially as the cost of necessities and everyday purchases have increased due to post-pandemic inflation. If nothing else, remember that you’re not alone, and there are ways to manage your debt and get your finances in order.
With that in mind, we’ve gathered four tips that you can start using today to get your credit card debt under control. See which ones are right for your financial situation – or apply them all to supercharge your trip to financial freedom.
1) Target One Debt at a Time
When you’re trying to manage high-interest credit card debt, it’s best to start with the basics.
Let’s say you’re trying to pay off two credit cards. The balance and terms are the same, but one charges 15% interest annually and the other charges 25%. Which one would be better for you to pay off first?
Paying off the 25% annual interest rate card will save you more money than if you pay the 15% card off first, or even if you pay them both off at the same time. Again, basic.
This strategic approach to debt reduction can generate significant savings over time – and just as importantly, give you a plan of attack to leave these financial burdens behind.
2) Pay More than the Minimum Payment
One of the ways that high-interest credit card debt accumulates over time is when users only make minimum payments month after month.
Credit card companies make it easy to fall into this trap, as the minimum payment they usually require is only 1% to 3% of your outstanding balance. But increasing your monthly payment beyond the minimum is an essential step toward paying off high-interest credit cards.
Simply put, failing to pay more than the minimum on a high-interest credit card could cost you hundreds or thousands of dollars in interest. Worse, you’ll make almost no headway toward actually closing out the debt.
3) Rework Your Budget
If you’re trying to free yourself from credit card debt, it might be time to look at your personal finances. There are probably areas where you can reduce your spending – at least temporarily – to reduce what you owe more quickly.
These belt-tightening moves aren’t always fun, but you might be surprised at how easy it is to cook at home instead of going out a few nights a week, or how easy it is to live without a seventh or eighth streaming subscription.
Whatever opportunities you find, be mindful about using those savings to pay off the most urgent or highest-interest debts first. Don’t let that money escape! Put it to good use now and you can get back to the luxuries you enjoy later – if you even miss them.
4) Consolidate Your Debt
This method for paying off your high-interest credit card debt requires a few extra steps, but you could save quite a bit of money if you go this route.
If you’re trying to pay off one or more high-interest credit cards, you can get a debt consolidation loan from Lendah at a lower interest rate and pay off those credit cards completely.
This way, instead of managing multiple accounts and payment schedules, you’ll just have one loan to pay off – and that loan will cost you less in interest than your credit cards.