Credit cards can be difficult to handle some times. Before you know it your debt can have risen to a level where you start to find it difficult to pay off the balance owing. Before you know it you are really struggling and less and less money is being paid off the card and more and more is being added to it. This article 10 Ways To Pay Off Your Credit Card Sooner explores ways to get your credit card back in control.
1. Always pay at least your minimum repayment by the due date
If you start to fall behind on your credit card repayments it can cost you hefty sums of money that would have been better off used to pay down your debt. How the card providers work is that if you don't make your minimum monthly repayment by the due date, then most providers will charge a late payment fee. This is generally around $25-$35. This penalty charge can add to quite a sum of money over a year . $300-$420, and as you can see this money would have been better paid off the debt instead.
To avoid missing your repayment due date, set up a task in your calendar a day or so before the due date, so that you are reminded to make your payment.
2. Try and pay more than your minimum monthly repayment
If you only pay your minimum monthly repayment and carry debt forward from one month to the next, you are likely to find you are barely treading water with the debt and that you are getting charged a lot of interest from one month to the next. If you make a bigger repayment and remember it might only be a few dollars here or there, it will all add up in the long run and help to reduce your debt and save you some interest.
To get some extra money, see if you can cut back on some of your spending. Maybe one or two less lunches out a week, or a few less takeaway coffees, or hiring a DVD instead of going to a movie. Think about ways you can grab an extra $10, $20, $50 a week to pay off your credit card.
3. Pay into your credit card more regularly than monthly
You don't need to wait until the day your repayment is due to pay money into your credit card. You can pay money into it at any time. This can be done via internet banking, cash over the bank counter, phone banking etc. So as mentioned in point three above, if you can get an $10, $20, $50 a week that you can use to reduce your credit card debt, then ensure you pay it straight into your credit card.
Set up a system where you challenge yourself to get an extra sum of money into the card each week by cutting back your spending. You will be surprised how much that amount will add up to at the end of a month and how much quicker your debt will be paid off than if you just paid the minimum payment into the card on a monthly basis.
4. Don't do cash advances
Doing cash advances on your credit can really cost you money. Not only are you getting charged interest from day one, you are often charged a fee for the privilege. Some credit card providers also separate purchases from cash advances and will charge a different interest rate on each and spread your repayment across each.
Use other means to get access to cash such as using your transaction accounts rather than your credit card.
5. Watch what you spend on your credit card
There is no point in living under an illusion that you are paying off your debt, if you are spending more on your card than you are paying off the card each month. This happens so often and people just don't seem to realise that their debt is going up instead of going down when they do this.
As an example, if you only pay $1,000 a month off your credit card, but you are spending $1,200 a month your debt is actually going up by $200 a month PLUS you will also have interest charges and other fees added to this amount. Take time to review your credit card statements and make a note of how your debt is traveling.
6. Set yourself some milestones and goals
One of the quickest ways to pay down any debt is to set yourself a goal. Firstly work out when you want your credit card debt paid off in full. Once you have worked out this date, you can then set some milestones / weigh points of where you need to get the debt down to by certain dates along the way. This way you will ensure you are paying the debt down and keeping on target with your goal.
You will need to carefully work out how much you need to pay off the card each month to get the debt down to the level you need it to be down to. Remember to factor in interest and other costs in your calculations.
7. Know your credit card
All credit cards providers issue their cards with different terms and conditions. Therefore you must know and understand your card.
Some questions to think of are:
When does interest start being charged for purchases / cash advances?
Do you have any interest free days?
If you don't clear the debt in full each month, how is interest charged on your purchases?
Are your repayments paid off your purchases or your cash advances?
What is the interest rate?
Is the interest rate a special offer that will terminate on a certain date?
Is the interest rate different for purchases / cash advances?
How much is the annual fee?
Is there a late payment fee?
Are there other fees that you are likely to incur?
What overseas transaction fees are there if you buy goods / services in overseas currencies? Once you know and understand how your credit card works, you might like to do some research to see if you are getting the best deal. Is there a credit card provider offering a better deal? Switching credit card providers could be an option to save you some money, but you must ensure you fully understand the terms and conditions of any new card you take on - read the small print very carefully.
8. Watch out for interest free days
Interest free days generally only apply if you pay your credit card debt off in full by the required repayment date. This doesn't mean just paying the minimum monthly repayment amount, it means paying the full balance owing on the card. If you don't pay the debt out in full, you are generally charged interest from the day the purchase occurs.
So if you have a credit card and never pay the debt off in full, you are not getting any benefit from interest free periods. So in that case you might be better off getting a credit card that charges you interest from day one, but has a much lower interest rate. After all, you are probably getting charged interest from day one on your current card.
9. Do a reality check
Jump into a loan calculator and put in your credit card balance and what you roughly pay off the credit card each month (after considering what you add to the card each month). Look at the figures, You might be shocked to see that your debt is still going to be around in 10 years time. How does that make you feel? Does that give you some motivation to work hard at getting some extra money to throw into your credit card? Well if that doesn't, looking at how much interest you are paying over this period of time should. Go on, check out your situation.
Play around with the loan calculators and work out how quickly you can pay your credit card debt off by adding some extra sums to your current repayment. See how much interest you can save by paying more into the card.
10. Work out where you can get extra cash
Any money you can amass is best paid off your credit card rather than being spent or sitting dormant in a saving account earning little to no interest. So, how motivated are you to get your credit card debt paid off? How serious are you in finding a solution to your debt problem? What are you willing to do to get some extra cash? What are you prepared to sacrifice?
Can you mow a lawn on a weekend, babysit a child during the week, do some overtime at work, sell some items on eBay, walk / groom some pets or get a part time job? Think outside the square for ways you can earn a few extra dollars that can be committed to paying off your credit card sooner.
Detective Heather Wood is Managing Director and writer for Money Detective Pty Ltd.
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