To get the best, take your time to understand the different types of credit cards offered by your bank and the benefits you are likely to enjoy from them. Look out for the amount you are going to be charged as interest rate in several transactions. You are likely to incur debts with your credit card if not careful. Excessive purchases can put you in serious financial trouble. It is important to follow a plan that helps you decide what actions to take to pay off your debts.
Getting into debt with credit cards can become a dangerous habit, as purchases can spiral out of control and put you in serious financial trouble. To avoid this, it is important to follow a plan that will help you decide what actions to take to pay off your debts as quickly as possible.
Clear One Debt at a Time
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Make sure to pay at least the minimum on each of your cards, then pay the full balance on one card at a time. How to choose which card to focus on? Review the interest rate section in your account statements, and in that section, you will know which credit card is the one that charges the highest interest rate and pays the debt on that card first. Then cover the debt with the lowest balance and take the money you used to pay that debt and use it to pay off the next lowest balance.
Pay More Than Your Minimum Balance
If you pay the minimum balance on your credit card, it will take longer to pay off the debt. If you pay more than the minimum, you will pay less interest overall. It is advisable to pay a little more than your minimum balance each month since the money you pay extra will be applied to your balance, and the lower your debt, the less interest you will have to pay.
Consolidate Your Debt
Consolidating your debt (using a balance transfer) allows you to combine several balances with a higher interest in one with a lower rate. In this way, you can pay your debt in less time and without increasing the number of payments.
How to consolidate a debt?
Take advantage of a low interest rate to transfer balances and move your debt from cards with higher interest rates. Balance transfer fees are generally 3 or 5 percent, although the savings you would get with a lower interest rate are more than the balance transfer fee.
If you have accumulated value at home, you can use it to pay off some cards. A home equity line of credit can offer you a lower interest rate than what your cards charge. Always keep in mind that closing costs apply, although an added benefit is that interest payments on home equity loans are often tax-deductible.
To control your expenses, it is necessary to avoid accumulating new debts, apart from the ones you have just consolidated.
Prioritize Your Expenses
Classify your monthly expenses such as food, transportation, housing, and entertainment. In your account statements, you can check your payments by category. Find areas that you can reduce and use the money that you have free to pay off your debts.