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Are you struggling to pay off high-interest credit card debt? If so, you’re not alone. Millions of Americans are in the same boat. This blog post will provide tips and explanations on how to quickly pay off your high-interest credit card debt. We will also discuss some of the benefits of doing so.
What Is High-Interest Debt, and Why Is It So Hard to Get Rid Of?
High-interest debt is any debt that has an interest rate above 12%. This includes credit card debt, store cards, personal loans, and payday loans.
One of the main reasons why people struggle to pay off high-interest debt is because they only make minimum payments. Minimum payments are the lowest amount you can pay on your credit card bill each month. Making only minimum payments will prolong the repayment period and increase the amount of interest you pay in the long run.
Pause Credit Usage and Use Cash Instead
If you’re serious about paying off your high-interest debt, one of the first things you should do is pause your credit usage. Pausing your credit usage means no more using your credit cards for purchases. Instead, use cash or your debit card for all of your purchases. You should also avoid taking out any new loans or lines of credit.
What’s The Benefit?
The benefit of pausing your credit usage is that it will help you save money. Using cash instead of credit makes you less likely to impulse buy or overspend on items. Resisting the urge to impulse buy can free up extra cash each month you can put towards paying off your high-interest debt.
Balance Transfers Are Your Best Friend
If you have high-interest debt, one of the best things you can do is transfer your balance to a 0% APR credit card. A 0% APR credit card is a credit card with no interest for a set period. This period is usually 12-21 months.
What’s The Benefit?
Balance transfers can be a great way to save money on interest and pay off your debt faster. However, there are some things you need to know before you do a balance transfer.
First, make sure you understand the terms and conditions of the balance transfer offer. Some offers will have a balance transfer fee, which is typically around three percent of the balance being transferred.
You will also want to pay off your debt before the intro period ends. You will be charged interest on the remaining balance if you don’t.
Pay Above the Minimum Payment Every Month
If you’re able to, one of the best things you can do is pay more than the minimum monthly payment. Doing this will help you pay off your debt faster and save money on interest.
What’s the Benefit?
Let’s say you have a credit card with a $15,000 balance and an 18% APR. If you make only the minimum payments, it will take you 288 months to pay off the debt, and you will end up paying $45,264 in interest.
However, if you make just $50 above the minimum payment each month, it will take you 84 months to pay off the debt, and you’ll only pay $11,452 in interest. That’s a savings of over $33,000!
Lower Your Expenses Wherever Possible
To free up extra cash to put towards your high-interest debt, you may need to lower your expenses. There are several ways you can do this.
One way is to cut back on unnecessary expenses, such as eating out, shopping, and entertainment. You can also save money by downsizing your home or getting rid of your car. Another way to lower your expenses is to get a roommate or move in with family members.
What’s The Benefit?
Lowering your expenses will help you free up extra cash each month to pay off your high-interest debt. This extra money can help you pay off your debt faster and save on interest.
Pick Up a Side Hustle to Increase Your Income
If you’re struggling to make ends meet, one thing you can do is pick up a side hustle. A side hustle is a job you do in addition to your regular job. There are several ways you can make extra money with a side hustle.
One way is to start freelancing. You can freelance in several different areas, such as writing, graphic design, web development, and more. Another way to make extra money is to start a blog and sell advertising or promote affiliate products. You can also make extra money by providing services such as dog walking, house cleaning, lawn care, and more.
What’s the Benefit?
The benefit of picking up a side hustle is that it can help you increase your income. This extra income can be used to pay off your high-interest debt faster. It can also help you save money on interest.
Try to Negotiate Your Interest Rates
If you have high-interest debt, one thing you can do is try to negotiate your interest rates. You can call your credit card company and ask them to lower your interest rate.
What’s the Benefit?
The benefit of negotiating your interest rates is that it can help you save money on interest and pay off your debt faster.
Make Two Payments a Month If Possible
If you’re able to, one thing you can do is make two payments a month. Doing this will help you pay off your debt faster and save money on interest.
What’s the Benefit?
Making more payments means your debt is gone faster! Making two monthly payments also saves you time and money in the long run. This method can also help strengthen your credit score.
Seek Out Credit Counseling
If you’re struggling to pay off your high-interest debt, one thing you can do is seek out credit counseling. Credit counseling can help you develop a plan to pay off your debt and improve your financial situation.
What’s the Benefit?
The benefit of credit counseling is that it can help you develop a plan to pay off your debt and improve your financial situation. Credit counseling can help you save money on interest and become debt-free faster.
Consolidate Debt With Your Home Equity
If you own a home, one thing you can do is consolidate your debt with your home equity. Consolidating debt means taking out a home equity loan or line of credit and using the money to pay off your high-interest debt.
What’s the Benefit?
The benefit of consolidating your debt with your home equity is that it can help you save money on interest and pay off your debt faster. A home equity line of credit may offer you a lower interest rate than what your credit cards charge.
Decide Whether You’re Going to Tackle the High-Interest Debt or the Smallest Debt First
There are two main ways you can approach paying off your debt. You can either focus on paying off the high-interest debt first, or you can focus on paying off the smallest debt first.
What’s the Benefit of Each?
The benefit of focusing on high-interest debt is that it will save you money on interest and help you pay off your debt faster. The benefit of focusing on the smallest debt first is that it may be easier to pay off, giving you a sense of accomplishment.
Final Thoughts
Paying off high-interest debt can be a challenge, but it’s essential to do if you want to get your finances under control. There are several things you can do to pay off your debt faster and save money on interest. Choose the method that makes the most sense for you, and stick with it until you’re debt-free!
Claire is a student turned financial enthusiast who has a passion for helping others. Her goal is to help as many people reach financial independence and early retirement as possible. When Claire isn't working on her blog, you can find her buried in a good book, testing recipes in the kitchen, or outside playing with her ducks.