6 Strategies to Payoff Credit Cards

May 30, 2018




















When Solomon wrote in Proverbs 22:7, "...the borrower is slave to the lender." (NIV), he was truly a wise man and this wisdom is something we need to hold dear to our heart. 


Having debt obviously means we owe something of value to someone who lent it to us.  Unfortunately, it is all to common in today's world to accept the fact that we collectively owe on average $15,983 in credit card debt, according to NerdWallet as of December 2017.


With all debt to include mortgages, auto loans, and student debt, that number quickly climbs to over $133,568.  


The reason why you need to focus on credit card debt first is because of something called "Revolving Debt". Unlike your automobile loan or most mortgages which are fixed rate (agreed upon rate where interest steadily declines over the course of the payment), revolving debt continually accrues until the debt is gone.


Even if you owe $25 on a revolving debt, you will still be paying interest on it.  This is why debt such as credit cards are so financially dangerous unless of course you are on the lending side in which you are steadily receiving these interest payments.  


Because you need to focus on getting rid of this debt, here are my six strategies to guide you towards reaching financial freedom. 



#1 Avoid Minimum Payments


Other than the obvious reason that paying the minimum monthly payment keeps you in debt longer, you are willingly paying the credit card companies more money.  This money is called interest payments.  With a high interest rate, it can lead you to serious financial trouble and your credit score could potentially take a hit as well.


Think of it this way...you pay the minimum amount because you are basically saying "This is all I can give you right now, but maybe next month I will pay more."  Perhaps not exactly, but you are delaying paying off this debt. 


According to Ed Mierzwinksi, U.S. Public Interest Research Group, "If you pay twice the amount of the minimum, that repayment period gets cut in half."  Regardless of how fast this debt gets paid off, the point is paying the minimum amounts only keeps you in debt longer so avoid this at all possible.




#2 Refuse to Use


When you use your credit card, you are increasing your credit utilization (CU).  For instance, if you have zero debt on a card, then your CU is 0.  The higher this number moves up, the lower your credit score moves.  It has an inverse relationship.  


I wrote an ebook on CU and my research has found that this makes up approximately 30% of your credit score.  This is quite a large portion of your credit score calculation.  If you are interested in learning more, check out my $1 ebook on Amazon, Increase Credit Score in 1 Month



#3 Negotiate a Lower Interest Rate


Companies want your business.  BOTTOM LINE.  If you present offers from other credit card companies that are offering lower rates, you stand a good chance that your company will lower the rate a few basis points in order to keep your business. Sometimes, they refuse but you need to be confident and have a good standing record with this company. 


Be sure you have researched and have the offers readily available, know the interest rates you are being offered and currently being charged, know you credit score, and ask to speak to the supervisor when you feel the conversation is getting anywhere with the financial representative. Be polite though!



#4 Apply Debt Snowball Strategy



Sometimes referred to as Debt Stacking


or Debt Snowball Avalanche, this tactic has proved very effective and useful in my personal life.   This is prioritizing your debts from highest interest rates to lower interest rates and then focus on paying off the highest interest rate debt first while paying the minimum payments on the other debt.


I recommend this approach but finding the lower dollar amount debt balance, and paying that amount off first.  This will quickly provide you with some extra capital faster that can be utilized towards debt payments.


Once the first debt is paid, use the same payment dollar amount from the payments and apply to the next debt in line.  Read Control Your Debt


For a limited time, get your copy of the Ultimate Budget Planner which is designed by me to organize your debts in an easy snapshot and then converting it to the budget page. 


 #5 Balance Transfer


Transferring a balance can be a life saver at times.  I only recommend this strategy if you are responsible and will not be adding more debt to this account.  


When you transfer a high balance credit card amount to a lower APR or 0% APR for a agreed upon period of time, you are basically saving time on interest payments.  If you perform this strategy, you need to really focus on this debt fast before the APR kicks in. 


Remember that opening a new account may potentially have a negative impact on your credit score so I would use caution.  Sometimes the impact can be a 10-point decline.  In some cases this may be worth it to get out of debt faster but shop around.


Getting a consumer loan to replace credit cards has its perks as well but only if the credit cards are discontinued by your refusing to use.  Read more on 3 Top Reasons to Get a Consumer Loan to Payoff Credit Cards



#6 Earn Extra Income


This is to go without say but you have to either reduce your expenses and/or increase your income.  Having extra money available can be a blessing when in debt because it helps to make the debt payments.  Read my blog, 5 Best Part-Time Jobs, on my recommended part-time jobs that has delivered me extra income in the past. 


If you have the passion and motivation to no longer be a slave to debt, then listen to King Solomon and let's work towards financial freedom and paying off our lenders. 






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