1. Target only one card – Carrying balances on multiple credit cards is a long slog to eliminate those debts. So from the start, give yourself a boost of instant gratification. Ask yourself of what type of short-term financial goal will make me feel like I’m making meaningful progress on debt reduction?
If your answer is “Having one credit card is totally paid off,” then, pay as much money as you can toward the card with the lowest balance first. You should do this even if you need to pay only the minimum amount on your other cards in the meantime.) If you are looking forward to “Boosting your credit score,” then, tackle the credit card with the highest utilization rate – that’s your balance divided by the card limit on your card. Since your card’s score takes a hit if you use more than 20 percent of your available credit balance, your score will significantly increase if you bring the utilization rate down by just 20 percent. And if you want to pay less in interest, then the tried-and-true method is to pay off the card that has the highest interest rate first.
2. Ask your credit card provider for lower interest rates – Often a simple phone call to the card issuer is all it takes to get a slightly reduced interest rate – provided that you have good credit score history and you are a long-term customer who spend and makes payments on time. You could get a couple of percentage points waived off, which can ultimately add up to hundreds of dollars saved annually.
3. Transfer your balance to other card (cautiously)- It’s move a credit balance from a card with a high interest rate is transferred to a card with a substantially lower one. And it’s one of the smart moves; you can save thousands of dollars a year. But be careful before opting this option because you should transfer a balance to other card only if you think you are committed to paying off the transferred debt within an introductory low-interest-rate time (which typically lasts from 3 to 12 months depending upon the card issuer. If you fail to pay the transferred amount in the time offered, your interest rate could skyrocket, possibly ending up higher than the one you just tried to got rid of.
4. If you’re really trapped, make minimum payments each month – Credit card issuers typically charge their interest on a daily basis, that means the sooner you make the payment, the faster your average daily credit balance is reduced, which converts into fewer amount in interest that you ultimately pay. If you’re on a tight situation, move on and pay the minimum due each month at least, then try to make the same again after couple of weeks later.
Credit: Jinnie Mathurin