Planning for a holiday?
A beach resort theme or an adventurer’s voyage?
Swipe your credit card and make the payment; now all set for the perfect break. Is this how you plan your travels or you keep saving money every month to go for a holiday?
Different people prefer different methods. Having a credit card solves the problem most of the time. And people these days opt for payments through credit cards then pay the installments. This way you don’t have compromise on the small things that brings a smile on your loved ones’ faces.
Wait! What about the interest rates? Have you ever wondered how much extra you might end up paying along with the interest rates for your credit card? If you give heed to it, you will know that the extra amount paid can be enough to plan another holiday!
So before we jump into the 3 step process of getting rid of credit card debt, lets take a moment to understand the benefits of not having credit card debt
Benefits: A credit-less card!
Less stress, improved health: As we all know paying off debt helps you to have a stress-free life and there by improve your health condition.
- Emotional relief: Paying off debt definitely provides you an emotional relief. A debt tends to break people by creating a rift between relationships, so clearing off debt as soon as possible saves relationships as well.
- Freedom to pursue other life goals: Paying off debt as early as possible helps you to pursue other life goals as debt impact concentration.
- An altered link between spending and happiness: Once you have understood the pain of debt you don’t fall into the same trap again. It helps your mind to draw a line when you have the urge to spend more on something that is beyond absolute necessity.
The 3-step solution to get rid of credit card debt
Stop using credit cards: Yes, you heard it right!!! You must stop being dependent on credit card as much as possible. Use cash or prepaid cards for purchases. In case of online shopping, the best way are to make payments using your PayPal account. When you use cash for purchase, you will be very vigilant and can control the amount you spend. To make this method work, prepare a monthly budget and prioritize your need accordingly.
Make extra principal payments: Generally, when people get huge credit card bills they tend to pay only the minimum amount due which actually doesn’t reduce the interest. Stop using your credit card for a while and during this period make a budget, save some money and try to make maximum payment to the principal amounts so that the interest rates will be reduced. If you cut down your extra expenses like candle light dinners, impulsive buying etc for a month or two, you could save up something which in turn helps you for a debt-free life.
Points to ponder before making extra principal payments on your credit card
- Try to clear the card with a higher amount and highest interest rates first: You should make a list of all your credit cards and the amount due along with the interest rates, which help you to prioritize which one to be closed first. There are high chances that you will be paying off the ones with the lowest interest rate first while the one with huge interest gets piled up on one side.
- Credit card balance transfer: You can transfer the balances from all credit cards to one so that you can track the progress of payment easily. It helps to settle the amount quickly and you can also save some interest.
- Try interest rates negotiation: You can try negotiating with your bank to reduce the interest rate and waive off the unnecessary charges which will help you to save some money.
- Track your progress and costs: Never lose track of your savings and expenditures. Unless and until you have the urge to control your splurge you will not be able to clear any debt. Try and keep a track of the progress of your payment once a fortnight or a month so as to get self-motivated.
Save up for your goals: The experts recommend you to have different savings account for different goals. For instance, if you want to buy a car you should maintain a different account where you start saving money and that money can be used for buying a car alone. Having different accounts will give a clear insight of the actual amount spent and saved.
The Bottom Line
Life can be simple and easy, if it is debt-free. Keeping it debt-free, lies on how you plan your finances. A credit card is both a boon & a bane, and it depends on the way you handle it. Hope you found your 3-step solution to get you out of your credit card debts.
Jennifer Cooper is a personal finance blogger who write at pro finance tips covering everything about personal finance management and frugal living. When she is not writing, you can find her cooking and travelling.