Having a credit card is one thing, making those quick easy payments – yay! But what is not so shiny and exciting, is the reality of having to pay off the balance! (Though, of course this is the most important!!!)
Credit card debt comes when you cannot pay off the balance on your account in full each month. Typically, the rule of thumb is that the higher the balance, the higher the interest on it. And with this in mind, on top of that interest, you can pay interest too! Hence why you should do everything in your will power to pay off your credit card bills on time and avoid it building up and debt mounting.
According to recent statistics, the average credit card debt per household in the UK (2023) is £2,277 – the highest it has been in 3 years. So…the following four tips on how to pay off your credit card debt will be very useful…get reading!
- Don’t stick to the minimum
When your credit card statement comes, and it’s the time of the month to start settling your payments, a suggested minimum amount will show. Take note…this is a MINIMUM.
What this means is that you can get clever and pay more. Ultimately, when paying the minimum, you are taking the slower route to paying back your credit card debt, and here is where the highest amount of interest is likely to be.
If you pay over the minimum, not only would you be reducing your interest charge, but you would also be saving yourself the hassle of mounting debt later on. Oh, and not to forget that some credit agencies give positive points when it comes to credit scores and borrowers paying more than the minimum!
- Make yourself a budget
In life, plans, forecasts and budgets should really be your best friends. A hack to pay off your credit card debt quicker, is to stay on top of what you have coming in and out, so that you can better work with:
- how much you have to save
- how much you owe/need to pay back
- how much you have to spend
There are so many budgeting tools out there…in some cases even just the old school pen and paper method does the trick! The experience can be a very enlightening one. You may find that you spend way too much on shoes, or meals out. Maybe your credit card is always being used for small payments that you forget about, and do not even realise but they build up. From doing a little analysis you can spot this…driving you towards setting personal limits and maybe even stopping yourself from using your credit card for certain things i.e. a large, important payments only rule!
- Get an emergency fund
Having an emergency fund is a life hack that you will thank us later for – guaranteed! It’s a financial safety net of money that is kept aside, to cover for financial shock. So, a great time is to use it if you fall short on your credit card debt. Of course, you should not rely on this fund solely to pay off your credit card bills, but it is useful to dip into when needed.
Lots of banks offer such fund accounts, so have a look – enquire with your bank.
- Debt payment methods for you to decipher between
So, you have the debt snowball and the debt avalanche, both hacks to help you pay off your debt quicker but working in slightly different ways:
- Debt snowball method – listing your debts and making the minimum payment to each. If you have any extra cash left after this, then you would put this towards paying off as much as possible on your smallest debt. You repeat this until each debt is paid in full. The idea behind this method is to give you a psychological boost, as you will be ticking off your debts and paying them off.
- Debt avalanche method – listing all your debts and making the minimum payment to each. If you have any extra cash left after this, then this would go towards paying off the debt with the highest-interest rate related. This is then repeated until all debts are clear. The idea behind this method is to save you money on interest, from prioritising the costliest debts.
Which one tickles your fancy?
There you have it, four hacks you can add to your life to help you pay off your credit card debt quicker…take action huns! Don’t let the debt stack up. The answers are all right here. Happy spending – always remembering to do it the right way.
In respect of the information above, this content is only for informational purposes and does not constitute any kind of financial advice.