Five Strategies To Catch Up On Credit Card Debt
Following the Christmas holidays, many people will be struggling to keep up with the enormous pile of debt they have accrued buying alcohol, food and presents and traveling over the holiday period. While it can seem intimidating, it’s important to understand that all debt is manageable and can be handled by following a few simple tips and tricks. Paying off debt sooner rather than later is essential to ensure you don’t accrue a heap of unnecessary interest fees. If left unchecked, interest fees will leave you in more debt than you anticipated which can make feelings of apprehension even worse. In this blog post we outline a range of strategies that credit card account holders can use to handle their debt and ensure they start the new year on the right foot.
Pay More Than The Minimum Monthly Payment
When paying off credit card debt, most people have three choices in front of them:
- Pay the full amount.
- Pay more than the minimum amount.
- Pay the minimum amount.
The foremost of these choices is the best option to take as it will allow you to take advantage of the interest-free period on your credit card. The second option limits the amount of interest you will pay, which can be helpful. The third option will result in interest accruing and make it difficult to pay back the rest of the outstanding balance.
Pay Off Your Smallest Balances First
If you are truly struggling to get a handle on your credit card debt, it can help to pay off your smallest balances first. Doing this will motivate you to tackle your debt in manageable increments. The feeling of achievement you will experience as you make these smaller repayments can help create a ‘snowball effect’ which makes paying off the next-smallest debt seem easier. The only issue with this strategy is that it may result in larger amounts of interest accruing on your high-value items.
Consolidate Your Debt
If you have multiple credit cards with an outstanding balance, it can help to transfer the outstanding amounts onto a single credit card. Doing this reduces the total interest you are required to pay and allows you to focus on getting a single balance cleared rather than several at once. Keep an eye out for balance transfer offers and take advantage of any interest free periods to pay down your debt.
Make Monthly Repayments a Priority
Before you engage in unnecessary spending after payday, set up an automatic payment to ensure that you pay off your credit card balance first. Prioritising interest reduction over non-essential spending is crucial to ensuring you get your credit card balance under control.
Don’t Spend More Than You Earn
When you have a credit card, spending more than you earn is easy to do. Your credit card balance can feel like free money until it’s time to make repayments. The fundamental principle of budgeting is to make sure you are spending less than you earn. If necessary, you can reevaluate your monthly expenditure to make sure you have enough money left to pay off your credit card as well as make essential purchases.
Contact Pillar Financial
Call our friendly team on 1300 730 309 or reach out via our contact page to ask what we can do for you as you begin your journey towards more financial freedom.