If you're tired of credit card debt and working on getting rid of it for good, you are probably focused on reducing the balances. However, it's also a good idea to work toward paying the least amount of money while you do so. Here are 4 tips for saving money while paying off your credit cards.
Target High Rates
To save money, you'll want to identify and pay off credit cards in the order of their interest rates. Make a list of cards and write down their interest rates as well as balances and minimum monthly payments. Start by targeting the ones with higher interest rates, working your way down to the low rates as you pay off cards. You'll save money each month and more of your payments will go toward the balances rather than interest.
Take Note of Adjustment Terms
If any of your cards have special, low (or no) interest rate periods, make sure you target them for payoff before the rate resets. Many low interest special offers include clauses that allow for the rate to be increased if you miss a payment, have a late payment, or have a balance at the end of the special period. In fact, some will charge all the interest you were not charged during the special offer if you still have a balance when the rate resets.
Use Your Home Equity
Transferring balances to a low interest credit method is a great idea to save money. However, transferring it to another credit card can simply result in adding to the problem. Instead, try tapping your home equity. Home equity loans have several advantages over low interest cards. They're often easier to access and have lower interest rates than most cards. And it's harder to rack up new debt on a home equity loan versus a card in your wallet. And, you can often consolidate several card balances into one home equity loan for easy payment.
Pay the Same Every Month
As you pay off or consolidate higher interest credit sources, continue to pay the same amount you were each month. Simply apply the excess to the next card in line. This method is called "snowballing" and it's a great way to make your payments pay off more and more over time.
Applying these four simple tactics when paying off your credit card debt will help you attack the problem with confidence and save up to hundreds of dollars as you improve your financial picture.Contact a financial institution, like Frontier Community Credit Union, for more help.
One day I realized that I might have a shopping addiction. Every single thing that came across my computer screen or that I saw in stores I felt like I just had to have. It was an overwhelming, ever-present need, and it was really difficult for me. I didn't know what to do about it, so I decided to work with a counselor to overcome my obsession. She referred me to a financial counselor, and it really helped. Within a few months, I was able to see my problem and stop purchasing things that I didn't need. This blog is all about choosing financial freedom.