The Best Way to Get Out from Under Credit Card Debt
In today’s economy, one thing we all know is that we should get out of debt, and stay there. It might mean going without a few “wants” right now, but will feel good later.
So, the first step is to quit getting farther into credit card debt, and the second is to pay off the debt you already have. What’s the best way to go about it?
If you have a card with a large credit limit and a low interest rate, it could be wise to consolidate all of your credit card debt into one monthly payment. There are, however, two dangers with that plan.
One is that you will begin making a minimum payment – thus putting fewer dollars toward your debt, which will keep you in debt even longer. Instead, add up all the payments you’re making to all of your credit cards now and apply that entire amount to the consolidated debt.
The other danger is that when you write a check to pay those other credit cards, your high credit limit card could decide to lower your limit to the outstanding balance – or even lower. You can’t trust what they’re going to do these days.
If that happens, it will have a negative effect on your credit scores, so consider your future plans before choosing that course of action.
The alternative is to keep the accounts you have in place, trim your budget to free up more money to pay on them, and concentrate on one credit card at a time until you get rid of the outstanding balance entirely.
You could, of course, spread the extra dollars among all your credit cards and pay them down at the same time, but it feels good when you can write “Paid in full” across a statement. Choosing one at a time to focus on will let you have that “feel good feeling” more than once!
So which account should you choose? Most would tell you to pay off the balance with the highest interest first, in order to save the most money. The alternative is to concentrate on the card with the smallest balance. Paying off a debt is a mental and emotional boost that might help keep you on track, and the smaller the balance the sooner you’ll succeed.
Whichever route you choose, apply all the money you were paying on that “paid off” card to paying off the next one. You’ll have success faster than you think.
