In this article I will be sharing with you 4 proven ways on how to pay off credit card debt. If you carry credit card debt, then you are not alone. Did you know that nearly half of America carries credit card debt? And, to make matters worse, the recent COVID-19 pandemic accelerated the cost of living, and cardholders have added more to their balance. But, there is good news. I have created a 4 proven step-by-step guide on how to pay off credit card debt so you can find financial freedom. So, below are the 4 proven ways on how to pay off credit card debt.
1. Create A Budget
If you find yourself swimming in debt, it is time to have a look at your spending. A budget is the perfect tool to help you get a better overview of how much money you are spending each month and how you are spending that money. One of the best budgeting tools out there is YNAB also known as “You Need A Budget”. YNAB is an online software program that breaks down your spending, helps you target spending goals, and gives you some pretty neat visuals to go along with the process. The first thing you will want to do when you start a budget is to figure out your, needs, wants and wishes. Some examples include rent, eating out, vacation, groceries, going to the movies, new car, utility bills, shopping at the mall and donating to charity. It is important you sort your spending into these 3 categories so that you have a better idea of where you can cut out your spending as you try to pay off your credit card debt.
2. Increase Your Income
While it is important to live a lean life, I should note that decreasing your income is limited to your basic living expenses. Increasing your income on the other hand is limitless. That is why I am a very big advocate for getting a side hustle to earn more money. In fact, the recent COVID-19 pandemic caused 3 in 10 Americans to start a side hustle (31%) and another roughly 1 in 4 Americans (24%) are planning to start a side hustle in 2023. The side hustle trend just keeps growing. In fact, 49% of Americans under 35 have a side hustle. More and more people are realizing that the regular 9 to 5 job is something from the past. To survive in today’s tough economic climate, it is important to build passive income streams to weather the storm. Some of the side hustle ideas one can start include blogging, content creating, YouTube affiliate marketing, food delivery, online surveys, nanny, etc. So what happens when you start making a few $100’s or even $1,000’s? Use the money that you earn from your side hustle income to eliminate credit card debt fast.
Your extra side hustle income does not mean you can go out and spend it on vacations, dining out, luxury purchases, etc. This extra income is meant to pay off your credit card debt as fast as possible. Once your credit card debt is gone, then you can think about investing extra cash from your side hustle or spending it on things you want or wish.
3. Determine Your Pay Off Method
In the finance industry, there are 2 main strategies for paying off credit card debt that is recommended by professionals. They are snowball Method and Avalanche Method. Basically, if you want the biggest bang for your buck, you will want to pursue the avalanche method because you will save the most money. On the other hand, if you are someone who is very impatient and has to see results in order to be motivated, then you may want to commit to the snowball method instead. I would also like to add another method that I’ve read about in the past, which is known as the Blizzard Method. As I am sure you have already guessed, the Blizzard Method combines both the Snowball and the Avalanche Methods into one crazy blizzard. The blizzard method is when you pay off the smallest credit card balance first, then pay off the highest interest rate balance. You will get the emotional boost you need to stay motivated by seeing fast results (paying off the smallest balance first), while you also save more money like with the Avalanche Method (when you pay off the highest interest rate). The most important part is that you implement a credit card debt payoff strategy to negotiate with ccreditors.
4. Negotiate With Creditors
One lesser-known trick to pay off credit card debt is to pick up the phone and work with your creditors. Believe it or not, your creditors want you to pay back the money you owe. And, odds are that you will be working with a large credit card company that can afford to bypass a few $100 or a few $1,000 in exchange for a payment plan deal with you. Here is when you have a good chance of negotiating with your creditors. You are a long-time customer and you have a good payment history. Your creditors may negotiate favorable options such as reduction in interest rates, offer of a hardship program, reduction in minimum payments, offer a payment plan with favorable terms and a financial relief if you are impacted by COVID-19. Financially speaking, there is a high chance that credit card companies will be willing to work with you.
Although no 1 credit card company will be the same when it comes to COVID-19 relief options, there is a high chance your credit card issuer will offer some form of relief. Some ways credit card companies would offer COVID-19 relief include, skip payments, delay payments, eliminate late fees, lower interest rates and extend timeframe for payment. Remember, the worst outcome is that your creditors say no.
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