Top tips to help pay off credit card debt
One of the challenges for new investors when they start to build wealth is the looming mountain of credit card debt built up through years.
The following practical tips will help you pay off the high interest credit card debt and get ready for your investment.
Sacrifice a couple of luxuries
It does not have to be luxury. Even small things like a homemade sandwich can make a difference. Instead buying coffee and breakfast on the way to work, make them at home. Instead of buying books and DVDs, borrow them from libraries. There are plenty of creative ways to cut back without feeling like a Spartan.
Track your spending
Don’t just make mental notes of the things you have bought over the month – write them down and add them up at the end of the month. Manually tracking your spending can help you make better decisions in spending and saving and take control over your financial life.
Develop a payment plan
Budget your other expenses around the credit card payments and have a clear plan of which debt to tackle first and which next. You might start with the biggest and most aggressive payments you can on the high-interest card. If the interest rates for all of your credit cards are all roughly the same, make the minimum payments on all but the lowest debt, so that it disappears quickly. Then move to the next lowest debt until it, too, disappears. The sense of satisfaction in making fewer and fewer payments each month will make the process less painful and help you achieve your goal faster.
Move your debt around
Shop around for long-term, low- or no-percent interest rate debt transfer opportunities, or try to transfer some of your debt to a low-interest card you already have. Be careful with how long the low interest rate will last and how much you have to pay for the transfer fee. Credit card companies are good at finding ways to take you money, so make sure you have read all the fine print. Check all the catches above and more before making your decisions.
Have an emergency cash fund
Instead of relying on your credit card when you need to make unplanned expenses, tuck some money aside strictly for emergencies. Set aside the money you have saved from Friday night drinks, manicures or parties, put it in a case or even hide it in a cookie jar. Keep in mind that this fund is only for emergencies, not for paying off the new iPhone you want.
Seek professional help
Talk to your credit card companies and explain your financial situation to them. In many cases, they will lower your interest rate for a period of time or even waive current late fee balances to make it easier for you to catch up. You can also find help in organizations like Credit Repair Australia, which provides a free credit report assessment service, helping you determine the best solution for your individual situation.
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