One of the resolutions of many people is to pay their credit cards. But if we ask them how they plan to reach that goal, many do not have a clear answer as to how they will do it.
The first step to paying off a credit card debt is to eliminate the use of it. For some people this first step is often very difficult. If you are used to spending freely with that money in plastic and you worry about the consequences, it will be difficult to break with the attitude of “buy now, pay later”.
To gain control of the habits without care of a credit card, some people scissor their credit cards making it impossible to use them again. Another option used for credit cards is to hide them in a safe place and promise to use them only in case of emergency.
Credit Card Debt
The second step to paying off credit card debt is to pay more than the minimum monthly amount. Many credit cards require a monthly payment of 2.5% of the outstanding balance.
For example: if you have an outstanding balance of $ 1100.00 (use dollar as currency) the charge of a credit card in the annual percentage rate is 18.9% (this percentage may vary according to bank or type of card you have) your monthly minimum It would be $ 27.50. It would take you 66 months or 5.5 years to pay off all of your $ 1100.00 debt by making the minimum payment. Your bank or credit card company will earn 676.94 in interest on your use of the credit card.
The monthly payment is purposely kept low so that the bank or the credit card company can earn as much as possible of the interest charged to the consumer (that is, to you). Paying only the minimum will keep you in your networks for years and more.
If you are paying the minimum month after month, ask yourself, “Could you put at least $ 10.00 extra for the monthly payment?” I’m sure most of us will be able to pay at least $ 10.00 extra dollars for each month. Try to drink fewer cups of coffee or do not eat at restaurants near work, but take prepared food from home to get that extra money.
Let’s continue with the example: take those extra $ 10.00 and add them to the monthly minimum of your credit card, being a payment of $ 37.50 (we continue with the previous example). Adding only those $ 10.00 per month of your minimum payment, your debt is reduced to 23 months or close to 2 years. On top of that you saved yourself paying $ 277.00 in interest. That’s money you can use to pay off the debt or save it. Imagine how you will be able to save with a simple strategy of 10 additional dollars for each credit card debt. And if you could put more than 10 dollars I assure you that you would earn more.
Paying off your credit card debts does not mean making large sacrifices or large sums of monthly money. It only takes a basic planning and a simple strategy to work it constantly together with a disciplined force of will in order to achieve our goals and resolutions.