Tips For Paying Off Credit Card Debt

It may seem easier to just ignore it, but your unmanaged credit card debt will haunt every step you take. It may sound like a daunting task, but you can pay off your debt with order and dignity! To attack your debt effectively, use the following strategies.

Make more than the minimum payment. Credit card companies love it when you pay just enough to get by every month. At that rate, you’re mostly paying off interest and barely scratching the surface of your actual debt.

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Look at your most recent credit card statements to get a ballpark figure on what your monthly interest is, then budget as much of a payment as you can over that amount to actually see a difference in your statement.

Pay off debt with the highest interest rate first. It goes almost without saying, but it’s something that a lot of people forget. If one credit line is charging you 11% Annual Percentage Rate, or APR (interest over the course of a year) while another credit line is charging you 9% APR, focus all your attention on the debt that falls under 11% interest rate. Pay it off before even touching the other debt. Sure, the other one will accumulate interest in the meantime, but since you’re paying interest either way, you might as well do it at the lower percentage.

Talk to your credit card companies. Explain your financial situation and ask if there is anything they can do to help. Many will lower your interest rate for a period of time and/or waive current late fee balances to give you an opportunity to catch up.

Never close cards with existing balances. It might seem like an easy way to get a handle on your debt, but it’ll do horrors to your credit score, and you’ll still be on the hook for the debt.[11] All this will do is send your credit utilization (your available limit v. your current debt) down, further driving down your credit score. Learn more here on how to increase your credit score.

Move your debts around. Let’s be clear, transferring money from a credit card with 12% interest to a card with 0% interest may damage your short-term credit. However, barely chipping away at your debt because your interest is too high will damage your finances in the long-term. Shop around for long-term, low- or no-percent interest rate transfer opportunities, or look into transferring some of your debt onto a low-interest card that you already have.

See what you can liquidate to lower your debt. No one likes doing it, but sometimes it needs to be done. If you just bought a car, a memory foam mattress, or a new jacuzzi, think seriously about whether you really need these items, especially if you’re paying for them on installment. Liquidating your big-ticket items now will mean less financial hardship for you later on.

How to Pay Off Credit Cards With Cash

Cash is a standard medium of exchange for numerous types of businesses. Cash also is the primary means of payment for people who either can't open a checking account or have made the decision to stay out of the banking system. Businesses and individuals who operate on a currency basis, but also use credit cards to pay bills or make purchases, have several options for paying off balances with cash.

Paying at the Financial Institution

Card holders can take cash to the bank or credit union that issued their credit card to pay monthly balances. In most cases, the teller can swipe the card to pull up the account, find the balance and accept payment. After making a cash payment, collect a receipt and confirm the deposit by accessing the account online or calling the customer service phone number on the back of the card. Be aware that financial institutions are required to report cash deposits over $10,000 to the IRS. An institution also may report multiple cash deposits of just under $10,000 if it suspects that deposits are being structured to avoid reporting.

If going to the location of the card credit card issuer is not feasible, the local bank that issued your debit card may provide a solution. In this situation, cash would first be deposited to the debit card. The payment then can be submitted online using the debit card, either directly to the issuer or using a service that specializes in online money transfers. An example of this type of service is MoneyGram, which can be accessed either online or by walking into a Walmart location.

Wire transfers from Western Union are an accepted form of payment at financial institutions around the world. To make a payment in cash, customers can go into a Western Union office and present the bill to be paid, or find their credit card issuer using the company's payee locator. If the service is being used for the first time, an account can be opened with a list of the customer's usual payees including credit card issuers. With account information on hand, payees and accounts can be accessed for quick transactions. The customer then can submit the cash for payment of the bill and a service fee for wiring the money. A receipt for payment is generated once the receipt of the wire by the credit card issuer is confirmed.

Many check cashing stores offer services that allow someone to deposit cash to pay a variety of bills, including credit cards. For people who receive payroll checks, tax refunds, or money orders but don't have a checking account, these stores offer the convenience of being able to cash a variety of checks and pay bills at a single location. Generally speaking, a valid ID is a necessity for check cashing, while paying a credit card bill requires a statement from the card issuer. For added convenience, some check cashing stores offer services similar to banks, including pre-paid debit cards and direct check deposits for payroll and government checks.

Paying off your credit card: Fixed payments and interest

Paying off a credit card with a credit card

Paying off a credit card with a credit card

If you borrow a large amount of money on a credit card, it can be all too tempting to just make the minimum repayment every month, or pay back a small fixed amount. However, this can mean that you’ll be stuck with the debt for years – and you could end up paying back thousands in interest.

How long you’ll be paying off a credit card may not be something you’ve really given much thought to, and if you’re in this position, you’re not alone. In a recent survey*, we asked respondents how long it would take to clear a £3,000 balance from a credit card with an APR of 18.9% if they only made fixed monthly payments of £50. More than two in five respondents admitted they don’t know how long this would take. Only a fifth knew how long it would actually take to pay off – approximately 11 years and 11 months – according to Money Saving Expert’s minimum repayments calculator.

Being stuck with debt for this amount of time wouldn’t just feel like a weight on your shoulders, but if you’re repaying a few cards in this way, it could also affect your credit score. Lenders may think that you already have access to too much credit, so if you try and take out a loan or mortgage in the future, you could be turned down.

Paying thousands in interest

However, being saddled with debt for years isn’t the only peril of repaying small amounts towards your credit card balance. You could also end up having to pay back thousands of pounds in interest, which can sometimes be even more than the original balance.

When respondents were asked how much interest in total they thought they’d pay on the £3,000 balance, almost half said they didn’t know, with another fifth saying they thought the total interest over the period would be less than £403. In fact, you could have to pay over £4,000 in interest, and that’s on top of repaying the original £3,000 balance. This shows just how costly it can be to repay your credit card debts this slowly, so it really pays to try and clear it faster – as long as you can afford to make bigger monthly payments.

Cutting the interest you pay

You don’t have to pay back massive amounts of interest if you’re repaying a similar balance on a credit card. In our example, just by increasing the monthly payments from £50 to £60 would cut the repayment time from over 11 years to seven years and six months, as well as slashing the total interest payment to £2,392 – that’s a saving of almost £2,000! If you were able to repay £100 a month, you’d clear the balance in three years and four months, and repay just £968 interest in total, a much more affordable amount.

Another way you could save is by moving your balance to a 0% APR balance transfer card. These are only usually available for those with good credit history, so you may not get accepted for one if you’ve had problems in the past. If you do get a balance transfer card, make sure you pay off the full amount before the 0% APR deal ends – otherwise the interest rate could skyrocket and you could end up paying back a lot more in interest.

*OnePoll questioned a nationally representative sample of 2,000 adults aged 18 and over between 11 th February and 23 rd February 2015, of whom 635 were in Scotland.

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Trying to Pay Off Credit Card Debt? Then Stop Doing These Things First

So you're finally getting serious about your credit card debt. That probably means you've started paying more than the minimum due each month in order to whittle your balance down to zero faster. Congratulations! You’ve made a first step in the right direction.

But a good payoff plan is about more than just throwing money at debt. It also includes knowing what kinds of credit pitfalls to avoid so that you aren't slowing down — or even reversing — your progress.

Not sure what we mean? We asked several LearnVest financial planners to share some of the biggest mistakes they've seen people make while trying to pay off credit card debt. Here's what they had to say — along with some advice for avoiding these common credit traps.

1. Using Credit Cards to Pay for Everything

This is a big one, because it can be second nature to a lot of people to reach for their plastic, whether they're paying for a week's worth of groceries or a pack of gum. But "it's difficult to take steps forward when you are taking steps back," says Dillon Ferguson. Translation: It's twice as hard to pay down your balances when you keep adding to them each month.

The problem is that when you pay for every purchase with plastic, it's more difficult to keep track of your spending. Then you're stuck with a credit card bill at the end of the month that you can't pay off in full.

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The best ways to tackle this problem? For starters, set a budget (one that accounts for fixed and flexible expenses, as well as contributions to goals like retirement or paying off debt) so that you aren't spending more than what you're bringing in each month. "Without a budget, you really have no plan to pay off credit cards," Ferguson says. "It's like trying to drive across the country without a map."

Then make it harder on yourself to ring up your credit cards. By that, we mean tricks like unlinking your card from online accounts (Seamless, we’re looking at you), unsubscribing from flash-sale emails or even rerouting your daily commute to avoid passing your favorite coffee or takeout spot, suggests Alex Call.

Phil Workman also encourages clients to use cash only to pay for the flex spending portion of their budget. He's found this helps them “put more thought into where their money is going and whether they need to purchase something right then, or if it can wait," he says.

Still can't stop overspending? "Put your card in the sock drawer — or better yet, literally freeze your cards by putting them in water at the back of the freezer," Call adds.

2. Treating Your Credit Card Like an Emergency Fund

One of the consequences of having zero emergency savings is that when a bum transmission or chipped tooth strikes, you have to turn to your credit card to bail you out.

That's why it's important to have at least one month’s worth of take-home pay in a rainy day fund as a starting point, says Call, before ultimately working your way to three to nine months of pay. That way, when the next surprise expense pops up or you temporarily find yourself without a job or regular paycheck, you’ll have funds ready to dip into instead of having to go into debt.

Yes, you read that right. While it may seem counterintuitive, you could wind up hurting yourself and your finances by throwing too much toward your balances.

"Credit card debt is such a heavy emotional burden that [people will] do anything to pay it off," says Britt Barney. "If the minimum is $50 they'll pay $300 without realizing that now there's no cash left to spend on the day-to-day — so they're right back to using their cards to fill the gap."

Having to rely on your cards again after leaving yourself cash poor is called the "pay-spend-pay9quot; cycle. The key to avoiding this trap is making sure that your debt payments are at a level that you can reasonably afford and that leaves you with enough to cover your other expenses and savings contributions. “It’s important to find a balance between debt pay-down and day-to-day savings that allows for sustainable spending and gets the debt paid off in a timely manner," Barney says.

When you have multiple credit card balances vying for your attention, taking out a separate loan to pay them off so you have just one monthly payment can seem like a simpler and more efficient practice. The problem, however, is if you haven't addressed your spending habits, seeing a zero balance may tempt you to run up your credit cards again.

Workman recalls a client who took out a loan from her retirement account to pay off $50,000 in credit card balances — then went on to accumulate another $50,000 in credit card debt, which she paid off with a home-equity loan. “Her continued overspending was made easier by the fact that all her cards were paid off and she could run up the balances again,” he says.

Another potential downside is that even if you're getting a loan with a lower interest rate than your credit cards, your new monthly minimum payment may be higher than what you can afford, leading to the pay-spend-pay cycle again, cautions Sara Wright. So if you do decide to go this route, it's important to read the fine print and know both your interest rate and your expected minimum payment due each month.

Then, make sure you curb that spending. "It's important to change your spending habits," Wright adds. "Consolidating debt can be a great solution if you can commit to stick with a budget."

5. Using Credit Card Perks as an Excuse for Spending

Another day, another offer in the mail for a credit card that has better perks than the ones you have. But before you succumb to that new offer, it's important to figure out whether those benefits really will benefit you.

Take balance transfer offers. As with loans, a 0% balance transfer can work to your advantage when used responsibly — but not if it's a quick fix to free up your credit, only to run it up again. In addition, these offers come with a lot of fine print that could end up doing more harm than good.

For instance, if you haven't paid off your card by the time the 0% introductory offer expires, the credit card company could capitalize whatever interest you would have owed onto your remaining balance, says Ferguson. This could ultimately cost you more than if you'd never transferred the balance, depending on what your new APR is.

And if you are attracted to cards that dangle rewards points, miles or cash back in front of you, think about what the trade-off will be. For example, “receiving 3% cash back while paying 23% interest leaves you on the wrong side every time,” says Scott McKeever. “There is no reward a company can provide that tops being debt-free.”

Best 0% balance transfer credit cards and other smart tricks to saving money while paying off debt

Paying off a credit card with a credit card

Paying off a credit card with a credit card

Borrowing is back in the United States: Americans now have more outstanding debt loads than they did before the financial crisis, and many people are still struggling with student loans, car payments, mortgage balances — and yes, credit cards .

If your credit card debt in particular is giving you trouble — and you wish you could essentially hit "pause,9quot; stopping the clock on that ballooning debt as you hustle to pay it off — switching to a 0% balance transfer credit card might be right for you , even helping to improve your credit score if you do it carefully.

These cards essentially allow you to refinance your debt: a.k.a. lower the interest rate you're paying by moving to a credit plan with an introductory APR of 0%. That can save you hundreds of dollars. NerdWallet has a clear explanation of how this works: You move your debt from one credit card with a high interest rate to another that has the lower (or zero percent) rate. While this doesn’t reduce what you currently or already owe, it does mean you can lower — or, with a 0% card, totally stop — additional interest from adding up fast. You'll owe 0% new interest on your debt for as long as the term lasts.

"For example," NerdWallet writes, "let’s say you’re carrying a balance of $10,000 on a card that charges 15% interest and your goal is to pay it off in the next 12 months. By transferring it to a card that’s offering 12 months at 0%, you’d save $831 in interest."

Now, there is almost always an upfront fee — usually 3% or more of the balance you’ve transferred — that you must pay to switch cards. In the example above, the fee would be $300, meaning you'd only be saving $531 at the end of the day. While that's far better than nothing, it's a helpful reminder to shop around. Below, we'll discuss different kinds of cards available, as well as some apps and tricks that might be able to save you even more money.

Best balance transfer credit cards

Let's start with credit cards. Which card is best for you? The right card for you depends on what you're looking for. If you need to save money immediately, then you'll want a card with no transfer fee (at least not right away). If you can afford to pay a little more upfront, you can potentially snag a longer period of 0% interest.

And if you want something that offers the best overall value, there's a card for that, too. There are a host of guides breaking down top-rated balance transfer cards; here are some recurring favorites.

Best credit card for no transfer fee

Looking for a card with no transfer fee? NerdWallet recommends Chase's Slate Card which has no transfer fee for 60 days, and no annual fee: "This card wins the balance-transfer triple crown," NerdWallet says, offering 0% balance transfer for 15 months, no introductory fee for transfers made during the first 60 days of the account opening, and no annual fee. And you can get it even "with fair or average credit," they write.

For ValuePenguin , this is the best-overall card on the market. "As of 2017, there are very few credit cards out there that combine a $0 introductory transfer fee benefit with a long 0% APR period."

Among the drawbacks? No rewards, and you cannot transfer existing Chase balances. There's also a $15,000 cap on what you can transfer.

Best credit card for a long 0% APR grace period

Maybe you're willing to sacrifice a transfer fee for a longer 0% APR period. For the card with the longest 0% APR , NerdWallet recommends Citi's Simplicity Card , which has a 0% promotion period for 21 months. This card also allows for any kind of balance to be transferred, "including student loans and auto loans, as long as the account number is at least five digits long and doesn’t include any letters," NerdWallet says. But there is a fee of 3%.

ValuePenguin also recommends this card, especially if you can get it with no late fees. "Unlike the Chase Slate, the Citi Simplicity card . comes with a balance transfer fee, 3% or $5, whichever is greater," they write. "Even though it charges a fee, the six additional months of 0% APR the card provides over the Citi Simplicity card can more than make up for that difference."

Best overall balance transfer credit card

These two cards above all offer specific promotions. For the card with the absolute most features, NerdWallet recommends the Discover It card . "Most balance-transfer cards don’t give you much of a reason to keep using them after the 0% period expires," they write.

Discover It's rewards program sets it apart, NerdWallet says, thanks to paying 5% cash back for various purchases, for up to $1,500 each quarter, and 1% on everything else. You'll have to be careful with this card, though. "If you’re still carrying a balance when the 0%. APR runs out, you’ll have to pay interest on your purchases starting from the date of each transaction," NerdWallet notes.

TheSimpleDollar also rates this as best overall: "The Discover It does double duty as a balance transfer card and a cash back rewards card, with no annual fee," they write. "You could find yourself keeping this card for the rewards program long after you’ve used it to pay off a balance."

Best apps to help you pay down debt

Besides cards, there are a few apps that are designed to help better manage your debt load. One of these is Tally , a financial management app that became available to the public June 20. It helps you save you money on interest by analyzing your credit cards and history to optimize card payments, getting you better interest rates and avoiding late fees. If you have a balance transfer card, Tally can help you pay it off before your promo rate expires. The app is free to download; the company makes money only through interest on what amount you borrow from them — and only if they can save you money.

"Tally helps you stay on top of your 0% transfers so you can pay them off before the promo rate expires," CEO Jason Brown said in an email to Mic. The app "makes it easy avoid late fees, save money on interest, and pay down balances on all your other cards."

EarnUp is another financial management app — costing $9.95 per month — that specifically targets debt management. Its platform allows you to "manage all your loans in one place including your mortgages, student loan, auto loan, credit cards, and personal loans," according to the company. EarnUp creates a budget that allows your loan payments to be made on time, breaking monthly loan expenses "into bite size withdrawals on the days you get paid."

Finally there's Albert , which works like both of the above-mentioned apps, but also looks for opportunities for you to make moves like open a savings or retirement account at competitive rates.

Other solutions to help you pay down debt

Ryan Falvey, managing director of the Financial Solutions Lab at the Center for Financial Services Innovation, said he prefers apps to credit cards when it comes to managing debt. "It9apos;s important to pay attention to other fees that might be associated with [cards]," he said. "One reason why is [many] charge a balance transfer fee, and those can be not insignificant themselves."

If you're going to get a card, he says, you should also use an app or set up an alert through your card company that can remind you when a fee or due date may be approaching.

And there are also more traditional ways of reducing your debt, including simply picking up the phone, as points out: "You may be able to lower your interest rates or negotiate a reduced settlement on some debts by speaking with the customer service department," they write. "It is especially easy to negotiate the terms of debts that are charged off (dismissed) by the creditor or in collections already."

For more advice, check out Mic 's guide to wiping out debt — no matter how much you owe — plus secrets to the most effective psychological trick to help you pay back all the cash you've borrowed.

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