What’s the quickest way of getting your finances in order and saving hundreds if not thousands of dollars? Paying off your credit cards of-course.
High interest rate charges can drain your bank account and keep you from achieving financial success. 30% of your credit score comes from the utilization rates on your credit cards and maxing out your credit cards lowers your credit scores. Conversely, paying down your credit cards to a balance of 20% or less of the credit limits will actually increase your credit scores and help you get better terms on loans.
Whatever your reasons are, paying down your credit cards is a good idea. So let’s take a look at the best ways of paying off your credit card debt.
Here Are 3 Strategies To Pay Off Your Credit Cards
1. Pay Off Credit Cards With The Highest Interest Rates First
This is the most logical and cost effective way of paying off your credit card debt. You find the credit card which is charging you the most in interest and pay it down first. You make minimum payments on the rest of your cards and increase the amount of money you pay toward this card. Once paid off, you savings will allow you to pay off the rest of your cards faster and you focus on paying off the card with the second highest interest rate.
2. Pay Off Credit Cards with the Lowest Balances First
Let’s be realistic, we all want instant gratification and quick results to keep us motivated and on track. By choosing to pay down the credit cards with the lowest balances first, you can get to your first paid off, zero balance credit card in no time. This will keep you motivated to continue working toward your goal. Once you pay off one card, while making the minimum payments on the other cards, you can focus your attention on paying off the next lowest balance credit card. The strategy is called snowballing and may not save you as much money as the previous strategy, but it seems to work for the vast majority of consumers. In fact, most consumers that use the snowballing strategy to pay off their credit cards succeed, while those who use others stall out and fail.
3. Renegotiate With Your Creditors
The terms of your credit card agreements are not set in stone. If you are struggling to keep up with your growing credit card debt, call your creditors, explain your situation, and ask them to renegotiate the terms of the agreement. Ask for a lower interest rate and a lower monthly payment. Once renegotiated, pay off the cards as quickly as possible.