Credit card debt affects millions of Americans, and carries with it a host of bad side effects such as hurting your credit score and leaving you in financial ruin. When you run up a large credit card debt, you risk incurring large interest rates that will sink you even further into debt.
In addition, your credit score will likely take a turn for the worst, making it difficult to secure the lines of credit you will need in the future to buy a new house or car. Lastly, saving for the future becomes tough when all you can think about is drowning in your credit card debt.
Thankfully, there are some simple rules of thumb that can help you pay down that debt efficiently and effectively. Since it’s still January, think of this as a New Year’s resolution if you currently find yourself wallowing in credit card debt. Here are four ways to effectively and efficiently pay off that credit card debt.
1. Think about consolidating your debt with a balance transfer
One of the easiest ways to find yourself drowning in credit card debt is to run up a significant balance on several credit cards that charge high interest rates. Once you do this, it may seem like you will never be able to pay off all that debt. However, there are balance transfer credit cards out there that allow you to transfer balances from your high-interest credit cards to a new credit card that offers a long introductory period of 0% interest on balance transfers. You should look into combining those high-interest balances into one balance that won’t charge you any interest for a period long enough to get back on your feet.
2. Pay down those high-interest cards before any others
This is one of the more obvious rules of thumb, but if you’re stuck with sizeable credit card debt, you should pay down the credit card balances that are charging you the most interest every month. If you fail to act on this one, you risk getting plunged deeper into a debt hole because of all of those interest charges you will rack up.
3. Make sure to send your minimum payment
Sometimes money gets tight, but that’s just a fact of life. While a lot of times this is out of your control, what is in your control is the ability to make at least the minimum payment on your balances. By making the minimum payment on your credit card balances each month, you greatly improve the chances of your credit score not being completely ruined. In addition, failure to pay the minimum payment on your credit card balance each month runs you the risk of being hit with even higher interest rates.
4. Get rid of that credit card debt before saving
While it may seem prudent to have a large stockpile of savings lying around, it actually is more prudent to pay down that credit card debt first. This is because credit card interest rates are so high these days that they will almost always accrue faster than any return you could generate on the money you save. In addition, your credit score will take a big hit if you ignore that credit card debt in favor of saving cash.
Logan Abbott is the editor of MyRatePlan.com, a leading information and comparison shopping website for credit cards, phone service, satellite TV, insurance, and travel. He has over 10 years of experience as a credit card and personal finance expert.