Did you know that, according to NerdWallet, the average American household carries almost $16,000 in credit card debt? And that number is increasing by a rate of about 8% per year.
Luckily, reducing what you owe on credit cards is an achievable financial goal—if you make a plan, and stick to it. Use one of these four tactics to start on the road to financial freedom.
Pay more than the minimum payment each month.
It’s so tempting to pay just the minimum payment on credit card balances, but this sets you up for a long, long payback. A better strategy is to pay the same amount for each card—above the minimum—and pay that total even as the total of your debt decreases. This puts additional resources toward the principal, which ultimately reduces interest and shortens the payoff time.
Pay off the highest-interest-rate credit card first.
This is known as the “avalanche approach”. More interest equals more debt. This approach puts the immediate focus of your debt-reduction program on the balance on the highest-interest-rate card. But, beware, if you have a large balance on your highest-rate card, it may take longer to pay off the debt, which may cause you to lose motivation. If you choose this method, don’t lose hope, keep at it. It’ll be worth it in the end, and the rest of the cards will feel like a breeze.
Pay off the lowest-balance credit card first.
This method is sometimes referred to as the “snowball approach”, and focuses on paying off debt on the smallest balance first. Doing so can help build motivation to continue paying down credit card debt. The key is this: once the balance on the first card is paid off, you put the monthly payment from that card toward another credit card balance — perhaps one with a high interest rate.
Consolidate credit card debt using balance transfers.
If you have a good credit score, transferring balances from a high-interest card to a zero- or low-percent card could be a great strategy. But please, please, please read the fine print! If the new card has a transfer fee, make sure you’ll save enough on the temporary interest reduction to make the cost worth it. Also, try to pay off the card before the introductory low-rate period ends, and the interest rate goes up and adds to your debt.
The PLR Philosophy
At PLR, we believe that everyone's insurance needs are not the same. Because of that, our approach to insurance begins with a conversation; we want to learn about you--your life, your home, your needs. We use that information and our expertise to match you with the policy that gives you the coverage and peace of mind you need, without busting your bank account.
If you are ready to start the conversation, you can get in touch with us here.