Credit card debt is easy to get but hard to get rid of. It’s a step removed from real money, which makes it very easy to spend without a concrete link to the actual money you’ll be using to pay it off.
There are ways to efficiently pay off credit card debt though.
Like most areas of personal finance, it takes planning and a little willpower. Otherwise, it’s very straightforward.
So straightforward in fact, there are only four things you need to do.
1. Stop spending on the credit card
The first and most important thing to do is to stop using the card. If you’re already in debt and want to clear it, continuing to use the card isn’t going to help.
Put it away, cut it up, give it to someone else to look after or whatever. Make sure you stop using that card.
If you don’t, you’re unlikely to improve your situation and nobody wants that.
2. Transfer the debt to a 0% balance transfer card
As long as your credit score hasn’t been impacted, you should be able to qualify for a 0% balance transfer card.
This type of card allows you to transfer debts from other cards onto this one at 0% interest for a set period.
As the average interest rate for cards is anywhere between 19.9% and 39.9% APR, that could mean a significant saving.
Open a 0% balance transfer credit card, transfer all your credit card debt over to it and prioritise paying it off.
If you cannot transfer all credit card balances to the 0% card, transfer as much as possible and set up a minimum payment to that card.
Prioritise paying off the other credit card(s) until they are cleared, then move on to the 0% card.
The idea is to pay off debts with the highest interest rate first. That way, you’re paying the bank less and more off the amount you owe.
3. Prioritise paying off debt
This process will only work properly if you cut back on spending and prioritise paying off debts.
Shifting to a 0% balance transfer credit card is only efficient if you’re not accruing debt at the same time.
It’s a method of gaining control of debt while minimising interest payments. It is not a way of delaying having to pay off the debt while you spend more.
This is where willpower comes in. There must be a genuine desire for change and a willingness to control the urge to spend.
Do that and you’ll quickly get on top of your spending and reduce the amount you owe.
You’ll also create healthy spending habits you can take further into life.
4. Review spending habits
Here’s where willpower really comes into play. Reviewing spending habits is a wholesale look at how you spend money, what you spend it on and the value you get from that spending.
If you’re barely breaking even each month and are using credit cards to pay bills and put food on the table, there isn’t much you can do here.
If you’re spending on luxuries or discretionary items, you need to take a long hard look at whether those items give you genuine value or whether you could life without them or with less of them.
You don’t have to stop spending altogether. Just spend within your means while achieving your financial goals.
Perhaps set a monthly budget on clothes or extras.
That’s a good way of still living the way you want while not building more debt.
Easy to say, harder to do as I know only too well!
It’s difficult to write a guide like this without risking skimming over the realities of everyday life.
Yet I have to, otherwise I cannot provide advice. Suffice to say, I know first hand how tough it can be to scale back spending, manage debt and control the urge to splurge.
If I can do it, anyone can!
