In case your wallet is overflowing with plastic and your mail comprises of more and more bills, it is about time, you started organizing your credit cards and paying off your credit card debts. In fact, in case you are having a substantial debt, it would be a good idea to consolidate to a lower-rate credit card. This could be helpful in saving quite a hefty amount in interest charges. However, you need to be cautious and use the correct approach, while consolidating debts or canceling credit cards. Here are some effective ways of paying off your credit card debts.
Set a Goal
To be able to successfully pay off your credit card debts, you need to identify some realistic goals. It may be really easy for running balances up in quite a short span of time; it would really take considerable time and strict discipline for paying them off. Monitoring your progress on a regular basis would help you stay motivated and on the right track toward achieving your goals.
Stop Using the Cards
If you are serious about getting out of the debt then simply freeze the credit cards. Get out of the habit of carrying credit cards in your wallet and stop using credit cards for paying the daily purchases. Put away your credit cards till you have paid off the entire outstanding balances. Learn to differentiate between needs and wants.
Start Prioritizing Your Debts
It pays to make a comprehensive list of your debts including interest rates, charges and outstanding balances of course. It is a good idea to prioritize them as per their importance. Usually mortgage payments is on top of the list followed by vehicle payments as these are essential for providing shelter and transportation for commuting to and from the workplace.
Remember that priorities vary from person to person. Some people would like to pay off high interest rate loans first, while others would be interested in paying off specific debts such as payday loans first. You should decide about the ones you would like to tackle first.
Keep Some Ready Cash in Hand by Trimming Your Expenses
Review your monthly expenses for effectively speeding up your entire debt repayment process and getting out of debt quickly. Identify how and where you could cut down on the expenses. Start by keeping track of all your costs and expenses for a fortnight. Be vigilant about where all the money is actually going. Simple things like making your own cup of coffee every morning instead of getting it from a café could save quite a lot of money every month.
Chalk Out a Smart Monthly Spending Plan
You must chalk out an effective monthly spending plan. If you stick religiously to this plan, you would not end up overspending. You would learn to live within your means. You would now get an idea about how much time it would take for you to get completely out of debt. A well thought-out monthly expenses plan would help you stick to your budget and would maximize your capability of paying off your debt.
Use Debt Consolidation Loan
If used correctly, balance transfers and debt consolidation loans could be brilliant ways of getting out of debt. You could think of consolidating your debts by using the best consolidation loans or even by transferring the credit card balances effectively to a relatively lower rate credit card. Probably consolidation is the best way to pay off credit card debt, but you need to investigate carefully the terms & conditions, overall interest savings and also, the hidden costs.
Use the Most Applied Way
Probably the most effective way of getting out of credit card debts is to strategically pay off the fixed monthly payments such as term loans, mortgages and vehicle, first. Make minimum payments toward the credit cards with lowest interest rates. Make maximum payments on credit cards with very high interest rates. Once you have paid a debt, use the excess amount for paying down the next credit card that has the highest interest rate. This effectively saves money and assists you in paying off all the debts faster.
Use Savings for Paying Off Your Debts Faster
Most people contribute regularly to a savings plan. This is a great fact, but think of it as the money that could have been used to pay off the debts faster. In case you are in the habit of saving money for irregular expenses and have already come up with an emergency fund, you could stop making any contribution to your savings account, till you have successfully paid off what you actually owe. Think of using pay increases, income tax refunds, or even some other unexpected funds for paying off your debts.
Author Bio: Jeff Peters is a financial consultant specializing in debt management techniques. He suggests the best way to pay off credit card debt as per unique individual requirements.