Credit cards are a great tool. They let a person avoid the risk of carrying around cash, and allow people to make purchases at a distance through the Internet or by telephone, creating consumer choice and allowing for people to choose the most competitive prices on products.
However, credit cards can also be dreadful for those who don’t know how to effectively manage debt. It is not uncommon for someone to quickly rack up an enormous credit card debt without realizing they did so. Suddenly, they’re faced with the requirement that they forgo future consumption and recreation to pay off the card.
If you are faced with a large credit card debt, here are some ways you can pay it off faster.
Transfer to a Lower Interest Card. If you are currently paying 25% interest on your card and there’s a company offering 15%, you may consider transferring to one of those 0 balance transfer credit cards you get offers for every week. This doesn’t pay off any debt but it helps prevent incurring more debt at such a high rate by lowering the interest that is charged on your outstanding balance. It makes little sense to pay more money when you don’t have to.
Avoid Recreation. Going to the movies, traveling, and eating out at restaurants are all great. But when you are paying 15% or more per year just to maintain your credit card debt, it doesn’t make sense to do more spending as that would amount to a 15% per year tax on every bit of money you spend on anything other than paying down your debt.
Try to forgo entertainment for awhile in favor of staying home and watching movies that come free on the television, and making your own meals. This will give you a greater portion of your budget that you can use towards paying your credit card.
Cut Up Your Card. This may seem drastic, but if you have a sizable debt and you are an impulsive spender who can’t help but use your card, cut it up and dispose of it. Focus on paying the bill you get every month and don’t bother having physical possession of a card, so that you can pay it without simply adding to the debt at the end of the month again. If you are really a problem spender, you might even consider calling the card company to ask that they close the account, and continue paying the bills once you are completely barred from spending.
Use Savings. If you have retirement savings it might not make sense to sell them since you lose beneficial tax exemption, but if you have normal bonds or CD’s which are gaining 3% or so per year, it makes little sense to keep holding them while paying 20% per year on your debt. Sell the bonds you have or cash out your savings account and apply it to your credit card debt and you will do a great deal for your finances.
