Millions of Australians have a credit card and while there's no denying that credit cards can be helpful, they can also start you down a slippery slope that's hard to get off. If used incorrectly credit cards can lead to mounting debt, interest, and dealing with a bad credit rating.
So, if you're wondering, "How can I pay off credit cards faster?" wonder no more! In this article, we'll outline four essential tips that'll help you pay off credit cards faster.
1. Make more than the minimum monthly payment
Whenever you get a credit card statement from your bank or financial institution, there will always be a minimum payment amount that you're required to pay. But if you want to avoid paying interest and fees, it's important to pay more than the minimum payments each month. The higher your payment, the faster your credit card balances will be paid down.
If you're looking to increase your financial freedom and improve your credit score, paying more than the minimum repayment on your credit card is a great place to start. With some careful budgeting and planning, you can help find extra funds in your budget to make more substantial payments on your credit cards each month. And when you're credit cards are finally paid off, you can use that extra money for other important financial goals such as saving for a home deposit, or building an emergency fund.
2. Snowball your payments by paying off the credit card with the highest interest rate first
Paying off debt can feel like a daunting task. But one great way to make progress is by snowballing your payments. This means that you focus on paying off one debt in full before moving on to the next. The best strategy is to pay off the credit card with the highest interest rate first, as this will save you the most money over time.
Make sure you keep paying at least the minimum repayments on any other debts and avoid getting any late fees, while working to clear the highest rate card, and never miss a payment as it could have serious repercussions for your credit rating. The benefit of this approach is as you knock out each debt, you'll have more money available to put toward the next debt on your list.
3. Make a budget and stick to it
Making a budget can be the key to paying off credit card debt and keeping track of your money in an organised way. Determining your income and expenses is the first step. Knowing what your goals are for saving or paying off debts will help you make an effective budget.
After establishing a plan, break it down into multiple parts by setting weekly, biweekly, or monthly budgets that all work towards achieving your overall financial objectives.
Be sure to look at all of your expenses, from groceries and rent to entertainment costs and dining out, so that you have a realistic idea of where your money is going. And most importantly make sure to stick to it! It might take some time to get used to but creating this discipline is essential for taking control of your finances.
When you realise how easy it is to cut back on unnecessary expenses each month, you'll be better able to pay off credit cards faster. And with these tips and a little patience, there's no reason why you can't get to a place where your credit cards are fully paid off in no time.
4. Attack your credit card debt from different angles by using a balance transfer, personal loan or debt consolidation loan
If you're struggling to manage your credit card debt, there are several options available to help lighten the load. You could take advantage of a balance transfer credit card that allows you to move your existing high-interest credit card debt from a credit card provider onto a new lower-interest card with no fees.
Alternatively, you could apply for a personal loan or a debt consolidation loan and use the money to pay off what you owe from different creditors at once. Not only do these provide more engagement on principal repayment amounts, but they can also result in significantly lower interest rates.
The beauty of a debt consolidation loan is that you will only have to make monthly payments on a single sum, rather than multiple smaller credit card payments that can sometimes become overwhelming. Consolidating your debt has been shown to be a very effective way of reducing high-interest rates and getting on top of debt repayment faster.
Is it better to pay off a credit card in full?
The aim of paying off your credit cards should be to save money in the long term. If your objective is to pay off a credit card as fast as possible, work towards clearing the card with the highest interest rate first. This will eliminate your debt faster and potentially save you a lot more money in interest payments over time.
This may mean paying only the minimum credit card repayments on any other card until you are able to pay it off in full. Paying a credit card in full and then cutting it up sounds good in theory, but it won't be much fun to do this if you can't pay for the necessities.
Credit cards can be dangerous if not used properly. A great way to get a handle on your spending habits is by consolidating your debt with a low-interest debt consolidation loan. If credit card debt is holding you back, it's time to get control of your finances and start working towards paying off credit card debt. Remember that the sooner you can pay it off, the more money you'll save on interest charges and the more financial freedom and peace of mind you'll get.
Driva puts the power of financial freedom in your hands in just a few clicks. Finding it hard to juggle multiple payments? Driva can help – forget all the stress and complexity of dealing with individual creditors; Driva's quick and easy way simplifies the hardship of high debts and sky-high interest rates. Put simply, Driva makes it easier than ever to be debt-free by taking away the hassle of having to manage numerous monthly bills, with debt consolidation loan options available in just minutes. Take control now!