Best Way To Pay Down Credit Card Debt Fast

Best Way To Pay Down Credit Card Debt Fast – You usually cannot pay off the full balance on one credit card with another credit card without transferring the debt from one card to another in a process known as a balance transfer. While this approach may work for some financial situations, it doesn’t make sense for everyone. Since transferring debt from one credit card to another may not be a good idea for your unique financial situation, you may want to weigh your options and consider other methods of paying off your debt directly.

This article discusses why you can pay off one credit card versus another and presents other options for paying off your credit card debt.

Best Way To Pay Down Credit Card Debt Fast

In some cases, you may have the option to pay one credit card to another through a balance transfer. Balance transfers allow cardholders to transfer their outstanding balances from one credit card to another, usually for a fee.

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Credit card issuers often offer introductory periods for new credit cards that include zero-interest balance transfers or low APRs, allowing you to consolidate your debt into an account with their company.

Although this provides an indirect way to pay with one credit card over another, please review the terms carefully before choosing this route. The introductory period is limited and you may pay high interest rates after the period.

Credit card companies generally require you to meet certain criteria for a balance transfer, including a good credit score. If you have bad credit, it may be difficult to qualify.

Also, the approved credit limit may not include your loan amount. Since lenders have different terms and conditions, consider shopping around and reviewing the terms and conditions of different credit card issuers before applying for a balance transfer.[2]

Credit Card Debt Payoff?

To find out if a balance transfer will save you money in the long run, you have to do the math.

Let’s say your current credit card has a 20% APR, you have a balance of $2,500, and you pay $250 a month. It will take 12 months to pay off your loan and you will pay a total of $2,758, including interest and fees of $258.

Let’s say that the new balance transfer card has a 5% APR (assuming the 0% introductory APR expires after 12 months), along with a 5% balance transfer fee, and you pay $250 for one month. It takes 11 months to pay off the loan using a balance transfer and you will pay a total of $2,625.

You may find that doing a balance transfer to a new card is worth your time and effort in this regard. In addition, this calculation assumes that the new card does not have an annual fee and that the APR entered has a duration of 12 months. The introductory period for balance transfers can only last for 6 months, so make sure you include this in your calculations.

How To Pay Off Credit Card Debt Faster

Because cards and issuers have different approval requirements and credit limits, find the best balance transfer credit card for your unique situation. The Forbes Balance Transfer Calculator helps you compare options.

While you may be tempted to pay off your debt by getting a cash advance on another card, these cash advances often come with high fees.

In addition to paying the ATM fee and cash advance fee, you may pay a higher APR on your cash advance than you would on regular purchases. Because cash advances can increase your debt, don’t use them except as a last resort in a financial emergency.[5]

Instead of opting for a balance transfer or cash advance, you may want to consider other routes to help you get your personal finances on track.

Paying Down Debt

If you have debt that you feel you can’t handle on your own, the services below can help you regain control of your finances.

If you have good credit, you may consider getting a personal loan to pay off your credit card debt. This idea makes sense if you can get a personal loan with a lower interest rate than your credit card.

However, this can lead to more debt if you don’t manage your finances responsibly. In addition, personal loans may include additional fees and interest rates that depend on a number of factors, including your credit score, information on your credit report such as late payments or fees, the loan amount, and the terms of the loan. .your contract .

Before you decide to take out a loan to pay off your credit card balance, consider these factors:

Ways To Pay Off Your Debt

As an alternative to simple debt transfers via balance transfers or personal loans, you can settle your credit card bill directly using this method. You may also want to consider whether to pay off debt or save money first, perhaps by setting a savings goal or adding side gigs in the future.

If you have several credit cards with outstanding balances, you can start the debt settlement process. This debt repayment strategy suggests that you pay off the card with the highest interest rate first before moving on to the card with the next highest APR.

By focusing on high-interest credit cards, you can avoid racking up more debt (in the form of interest payments) while trying to reduce it.

When deciding which debt to pay off first, you can also try the snowball method. This payment strategy pays off the card with the lowest balance first in order to eliminate debt from smallest to largest.

Credit Card Payoff Spreadsheets (excel)

While both methods help you pay off card balances, the snowball method allows you to build momentum and keep you motivated to eliminate debt from your list.[7]

Even if you are required to make your minimum monthly credit card payments, paying only that amount will keep you in debt for longer. Your credit card statement even includes warnings: how long it will take to pay off the balance and how much interest you’ll pay if you make the minimum payment. You can eliminate your debt faster – and pay less in interest charges – by finding ways to pay more than the minimum each month.[7]

While you can directly pay one credit card off another through a balance transfer, it doesn’t always make sense to do so. You may want to consider other methods that will more directly help you reduce your debt.

For help on the right financial path, there are tools and information to help you understand how to build or rebuild your credit.

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Ana Gonzalez-Ribeiro, MBA, AFC® is a Certified Financial Advisor® and bilingual personal finance writer and educator dedicated to helping populations in need of financial literacy and counseling. His informative articles have appeared in various media outlets and websites, including the Huffington Post, Fidelity, Fox Business News, MSN, and Yahoo Finance. He also founded the personal finance and motivational site www.AcetheJourney.com and translated the book Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP, into Spanish. Ana teaches personal finance courses in Spanish or English for the W!SE (Working In Support of Education) program that provides workshops for non-profit organizations in New York.

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Tap speed (or tap), ease of payment and even the prestige of “platinum” or “titanium” cards are among their attractions. Plus, shiny and sometimes colorful pieces of plastic offer discounts, prizes or miles when you shop.

But before you happily swipe, swipe (or tap, tap, tap), it’s important to know that when you use a credit card, you don’t actually pay out of your own pocket at the time of the transaction.

Unlike a debit card, where payments are made directly from your bank account, a payment made on your credit card is a short-term loan from the card issuer (e.g. a bank), which must be repaid. As with any loan, the amount owed is subject to interest charges.

On the other hand, if you pay your card bill before the due date,

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