Paying off credit card debt is not nearly as easy as actually paying off credit card debt. But it can be done. With a plan, dedication and discipline, you can make a living without credit card debt.
How much can you pay?
The first step to paying off your debt – even before deciding which debt to pay is to find out how much you can afford to pay off your credit cards every month. Your monthly budget is your best way of knowing how much you can afford to pay your debt.
If you don’t already have a budget, now is a good time to start.
Start by collecting all your net monthly income from all sources.
Then add all your monthly expenses, including minimum payments on all your credit cards and loans.
Subtract your expenses from your income. The number you get is your net income – what remains after you have paid all your expenses. This is what you can afford to send to your creditors every month. You are not limited to this amount. Look for ways to make more money to handle your debt. The more you can put towards your debt, the faster you will be able to pay everything.
Now that you know how much you can spend repaying your credit cards, the next step is to find out which account you want to pay with your credit cards.
Two Payback Methods
Here are the best methods for paying off credit cards.
- First the highest interest rate . Paying off a credit card with the highest interest rate will save you in the long run, especially if it is the most important credit card with the highest interest rate and the card with the highest balance.
Even if the card with the highest interest rates has the highest balance, it will take the longest to pay out. It’s easy to lose motivation by paying off debt when it takes too long. Therefore, the “lowest balance” method might be a better choice.
- First lowest condition . There are immediate tangible benefits to paying off a credit card with the lowest balance. The first balance is easier and faster to pay off. When you finally pay off the bill, a sense of accomplishment is the motivation to keep you going.
Choosing between the two can be difficult
If you are interested in saving money in the long run, start with the highest interest rate. Or, if you want to type some bills quickly, choose a low balance to begin with.
Then write down your debts in the order you will pay – whether from the highest interest rate to the lowest interest rate OR from the lowest balance to the highest balance. Record interest, balance, minimum payment. Then allocate all the extra money you have to pay by credit card at the top of the list. You will send a minimum payment to all other credit cards.
When you have paid off your first credit card completely, drag it out of the list and focus on the next card in the list. As before, pay all net income on that card. Continue this process until all the cards have paid off.
It may be helpful to use a credit card payment calculator to help you come up with a plan to pay off your credit card debt. Check out this list of the best credit card repayment calculators.