6 Tips To Pay Off Credit Card Debt


Yahoo Finance has posted a helpful article that provides 6 tips about how you can pay off credit card debt.

1. The first tip makes the very important point that paying off your credit card debt is more so about behavior modification and not just math. Dave Ramsey, author of “Total Money Makeover”, suggests paying off smaller debts first, regardless of interest rates, so you will feel motivated to keep paying off more debts, which he calls the “snowball” effect. He also says that you should only pay off a large debt first if it’s to stop a foreclosure or if you owe the IRS.

2. However, if you’re a numbers person, paying off a large debt with a high interest rate first could be more motivating for you.

“Also, if the account with the highest interest is utilizing more than 30 percent of that credit line, focus on paying that one off first to get it under that threshold,” she says. Doing so will improve your credit score since debt utilization, which is how much you owe compared to how much available credit you have, is an important factor in determining your score. The lower your utilization is, the better.

3. It’s very important for you to figure out exactly what the charges are if you’re planning to transfer a balance from one credit card to another. You have to have a plan of action to ensure that the transfer fees will be offset by the lower interest rate on the card you’re transferring debt to. It’s also important that you fight the temptation to use your newly cleared credit card and undo all the progress you’ve made.

4. You have to be careful when moving debts around, though, as it can only be a temporary solution to a long term problem. “The danger of moving credit card balances is that it’s easy to start thinking you’ve actually done something to address the problem,” Ramsey says.You still have to pay the debt off, no matter how many times you move it around.

5. Even if you’re focused on paying off debts, it’s also very crucial to remember to still save money for emergencies. You should have a savings cushion of at least 1 month’s income so if an emergency were to happen it wouldn’t add to the debt you’re trying to pay off.

6. If you have a huge amount of debt, using some of your savings to pay it off can seem like a good idea, but it’s important to not drain your savings. “I always recommend having a $1,000 emergency fund while you get out of debt. Emergencies will happen,” says Ramsey. Once your debt is paid off you can then shift your focus to saving money to cover a few months’ worth of expenses.

If you have had problems with a credit card or a credit report and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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