Business

Credit Card Debt Must Be Repaid Cease Making These Errors

You’re not the only one who is wondering how they’re going to pay off their credit card debt this year while looking at a mountain of bills. The Federal Reserve Bank of New York released data showing that in the fourth quarter of 2024, credit card delinquencies rose across all age categories and credit card balances grew by $50 billion to $1.13 trillion.

But you don’t have to let debt depress you. Financial advisers advise being truthful with yourself about your circumstances and then pursuing rapid credit card debt repayment options.

“A lot of people, when they go into debt, they’re just frozen. They’re not even able to look at it,” said Elana Feinsmith, a certified financial therapist, certified financial planner and money coach at Oakfinancialcoaching.com. “The first goal should be to stop and look at where you are right now, without any judgment.”

When it comes to paying off credit card debt, the biggest error could be doing nothing at all, but there are other traps that can make things go more slowly. Luckily, we’re here to help you avoid some of the most prevalent ones.

How to Pay Off Credit Card Debt Without Making These 10 Frequent Mistakes

When it comes to paying off credit card debt, it’s simple to make costly mistakes, whether you’re trying to pay off years’ worth of purchases or holiday gifts from the previous year. Here are ten typical traps to steer clear of.

Examine The Statements On Your Credit Cards

It could be unsettling, particularly if you have never calculated the precise amount of credit card debt you owe. However, knowing how much you owe and how long it will take to pay it off is crucial. First, see what the minimum monthly payment is. According to the CARD Act of 2009, all credit card companies must list the minimum payment amount as well as the time it would take you to pay off your balance if you just made the minimum payment.

“If you don’t want to be paying off last Christmas for three years, you’re going to have to make more than that [minimum] payment,” said Kate Mielitz, an accredited financial counselor and AFC® Program Manager for Beyond Finance.

If you would rather figure out how much you need to pay off debt, you may enter how many months you want to take to pay off your debt in a credit card payback calculator, such as the one on CNET sister site Bankrate.

Establish A Strategy

You know how you kind of suspect someone won’t keep their New Year’s Resolution of “I’m going to get in shape this year” when they tell you that? The same holds true for the way you want to settle your credit card debt. You require a well-thought-out, goal-oriented strategy, or budget.

While tracking every dollar while you pay off debt is part of budgeting, it’s not necessary to give up on everything you like.

“You need to have a plan for every dollar that you have in income,” Mielitz said. “It could be for rent or mortgage, to put gas in your car, for insurance, for dining out, for having fun, for debt. If you’ve got some money left over and it doesn’t have a job, don’t just let it float. Assign it a job.”

Often times, paying off credit card debt is the smartest use of unallocated funds.

Think About Requesting a Balance Transfer Credit Card

You can be eligible for a credit card with balance transfer if you’ve kept your credit score high. However, keep in mind that you can only use the balance transfer card to pay off your debt; do not utilize your previous cards to accrue further debt.

“If you do a balance transfer to another card, cut up those old cards,” Mielitz suggested. But don’t close those old accounts. Keep those old accounts open, though. Your credit score can be raised by the unused credit lines, which can help lower your credit utilization ratio, and the older accounts, which add to your credit history.

Get in Touch With Your Credit Card Issuer

Asking for assistance can never hurt, especially if it will enable you to pay off your credit cards more quickly.

“If you’re trying to dig yourself out of debt, there’s nothing wrong with calling the credit card companies and asking for a promotional interest rate,” Mielitz suggested.

Your credit score won’t be impacted and you could be able to pay off your credit card debt more quickly if you can lower the interest rate without getting a new credit card.

Take Into Account Using A Personal Loan To Combine Debt

Another alternative for paying off high-interest debt is a personal loan. Consolidating high-interest debt into a single loan with a lower interest rate can cut your monthly payment and save you a significant amount of money over time. Many consumers find convenience in having just one monthly payment. But to find out if you’ll truly save money, be aware of the payment terms, interest rate, and related costs.

Some individuals believe they shouldn’t even try to apply for a personal loan if they aren’t eligible for a balance transfer card. That isn’t always the case, though. With no impact on your credit score, a lot of lenders allow you to find out if you pre-qualify for a debt consolidation loan. Though it won’t guarantee you’ll be accepted, pre-qualifying will at least help you determine whether you can afford the loan.

Agree To A Spending Halt

The balance on your credit cards is unlikely to ever decrease if you’re trying to pay off debt but keep making new purchases because those purchases will always carry interest.

According to Jeff Rose, the creator of GoodFinancialCents.com, a short-term “no spend” plan might be the answer. While you should still pay for your necessities, you might be amazed at how much money you can save if you forgo eating out and non-essential purchases for a couple of months.

“It’s not a long-term solution,” Rose said. “Recognize that it’s going to be uncomfortable for the next several weeks. It takes commitment to reach your goal.”

Use Rewards From Credit Cards To Pay Down Your Bill

You’re probably eliminating whatever benefits you’re receiving from travel rewards if you’re paying off credit card debt because of the interest you’re incurring. It may be more beneficial to use your credit card rewards as statement credits.

“We often use credit card points for things we want in the future,” Mielitz said. “But if you carry a balance on the card, the best use of those points is to pay down your balance.”

Although you can still use incentives to lower your balance, you will still need to make your minimum monthly payment.

Avoid Squandering Windfalls, Bonuses, and Refunds

It’s almost tax day; will you be receiving a refund? Using your fortune to pay off debt can be a wise move. Don’t, however, end there.

“If you have debt, make a promise to yourself that you’ll put a large percentage of any new money that comes in toward that debt,” Feinsmith said.

You might not be aware that you are receiving additional money in the following ways: if your paychecks are sent out every Friday, you will receive a fifth payment in March, May, August, and November of 2024. When the additional paycheck reaches your bank account, think about setting up an automated credit card payment before you have a chance to consider utilizing it for anything else. Apply the same logic to other windfalls, such as presents and bonuses.

“If you find extra money, don’t automatically feel that it’s meant to be spent,” Feinsmith said.

Get A Temporary Side Gig

You put in enough effort at work; you don’t need a second job. However, there are plenty of options to make extra money in today’s gig economy, and they don’t all need to take a lot of time. Feinsmith advised earning extra money by babysitting or driving for DoorDash and allocating a portion of that income to debt repayment.

Consider each payment as a self-payment to maintain motivation, she advised. “Each time you pay down some of that debt, you’re also paying yourself by saving money on interest.”

Make A Plan To Pay Off Your Debt

Regardless of the actions you choose to take in order to increase your income and/or lower your monthly credit card payments, you might find it helpful to concentrate your efforts by choosing one of these debt repayment plans:

  • The goal of the debt snowball method is to pay off the credit card with the lowest balance first. Once the first card is paid off, you will apply all of the minimum payments you have made to the remaining cards, and so on. Because we can see progress more quickly, psychologically, that snowball seems to make the most sense, according to Mielitz.
  • To help you save the most on interest, debt avalanche focuses on paying off the credit card with the highest interest rate first. According to Mielitz, “avalanche works especially well if you have comparable balances on all the accounts.”

Feinsmith suggests establishing gradual goals if you want to feel accomplished but are dealing with bigger challenges. In this manner, financial successes such as paying off 20% of a credit card amount that is high can still be celebrated. Even if you are unable to pay off a credit card in full at once, she stated, “feeling successful is really important.”

Prepare Yourself For Monetary Success

Experts concurred that while paying off debt is crucial, it’s equally critical to change the mindset that led to debt in the first place. Spending wisely can help you form healthy habits that you can maintain throughout the year.

Most importantly, don’t chide yourself for past mistakes. “Be compassionate with yourself,” Feinsmith said. “You deserve to have money, so working through your debt will only help you get to a better place.”

Komal Patil

Recent Posts

LinkedIn Provides B2B Marketers With Improved Insights And Targeting

LinkedIn has announced changes to its Campaign Manager platform targeted at providing better data and… Read More

2 days ago

Edwin Ting’s Tips for Creating Lasting Family Memories

Family plays an important role in shaping who we are and how we navigate life.… Read More

2 days ago

Netflix Collaborates with Food Delivery Service Just Eat for Squid Game 2 Marketing Ad Campaign

Netflix has collaborated with food delivery service Just Eat on a new campaign to promote… Read More

3 days ago

Step-by-step Guide to Start Integrating Artificial Intelligence (AI) into Your Business Operations

Businesses that are just beginning to look into the possibilities of artificial intelligence (AI) may… Read More

4 days ago

Easy Brand Marketing Strategies Can Help Any Small Business Grow Its Sales

Easy brand marketing strategies can help any small business grow its revenue. There are numerous… Read More

4 days ago

Indian Travelers Face Higher Visa Denials Amid New Dubai Regulations

Dubai, UAE, December 18, 2024: Dubai has always been a favorite destination for Indian tourists.… Read More

4 days ago