Steps to paying off credit card debt
Reach a zero balance on your credit cards with this simple, step-by-step guide.
If you’ve been putting everything from meals to textbooks on a credit card throughout the school year, you may be facing a large balance come summer.
Credit card debt is considered “bad debt” because it comes with extremely high interest rates, no appreciating assets (unlike a loan on a house, where the house value may increase, or appreciate, while you live there), and minimum monthly payments that are so low that it could take several years to pay off your card.
Follow these simple steps to take control of your balance, once and for all.
1. Assess the debt situation with each credit card you have with an outstanding balance. Make sure you know the total amount owed for each card and the interest rate on each.
2. Pay off the card with the highest interest rate first. The higher your interest rates, the more you’re paying each month in interest on the debt, so you want to eliminate that as quickly as possible.
3. Pay more than the minimum payment each month — much more, if possible! The sooner you can pay off your debt completely, the less money you’re spending on interest.
4. Set a monthly budget and stick to it. Calculate your fixed expenses each month, including the amount you’ve committed to paying off your debt, and then plan for variable expenses afterwards. Keep in mind that you may need to cut back spending on entertainment or shopping for a while!
5. Stop using your credit cards for the time being. While you’re in the process of paying off credit card debt, don’t keep adding to your balance by spending more with your credit card! Stick to cash for a while — that way, you’re only spending what you know you can afford.
6. Call your credit lenders (the companies who issued your cards) and discuss any possible assistance they can give you. There are lots of ways they may help, such as lowering your interest rates or waiving late fees to help you get back on your feet. There’s no guarantee they will cut you a break, but it doesn’t hurt to ask! Mentioning that you’re a student is a good idea, too.
