How to Pay Down Credit Card Debt

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Credit cards can be a valuable asset, allowing you to earn free flights and other rewards, but only if used properly. (See how to use a credit card properly)

If you are one of the millions of people that currently owe a balance, knowing how to pay down credit card debt if very important.

By their very nature, credit cards are designed to keep you in debt.  The banks make no money if you pay your balances off on time.

Here are some very simple tips for getting yourself out of credit card debt more quickly:

1) Understand your situation.  Thanks to the brand new credit card reform bill, banks are now required to disclose very useful information on your statements.  You can now see how much interest you are paying and how long it will take you to pay down the credit card debt.  Use this information to set goals for youself!

2) Pay the highest interest first. If you owe balances are more than one card, it goes without saying that you should pay down the balance with the highest interest first.

If you must, pay only slightly above the minimum payments on other cards with less interest and attack the one with the most interest first.  Once that is paid off, move on to the next one.

3)  Don’t add to the balances. Don’t undo your efforts by continuing to use the same cards that you are trying to pay off.  That is the exact treadmill the issuer hopes that you get stuck on!

4)  Never pay just the minimum. Always add something onto a payment beyond the minimum, even $50 will make a big difference over the long run.

5)  Make an extra payment. At least once a quarter, make a small additional payment rather than only paying when you receive statements.

6) Negotiate with creditors. It seems like a long shot, but given the current economic situation many creditors will work with you and may offer a lower interest rate in hopes that you won’t simply just default.

Call customer service, be open and courteous, and be prepared with examples of how you have been making extra payments, etc.  Remember, they have access to your statement so don’t even think about asking for a break if you are still making purchases in expensive restaurants or at clothing stores.

7) Pay off credit cards first. Pay down credit card debt first before paying back other things such as student loans, or even mortgages.  Credit cards nearly always have the highest interest rate, so take the money you would have spent to make an extra house payment this year and apply it to card balances.

8) Set up automatic monthly payments. Go online and set up an automatic monthly payment to be made on the credit card with the highest interest rate.  Remember, you don’t necessarily have to wait on the automatic payment, you can still make small additional payments each month to speed things along.

9)  Put off future purchases. Think about your current lifestyle.  If you have a large purchase planned (that won’t be made on credit) would it be better to divert that cash to pay down your credit card balances first?

You can save yourself thousands in interest over a year just by making small decisions each month; never give up hope or sink into despair, credit card debt can be managed with just a little mindfulness!