Credit card debt plagues thousands of American consumers each year.
In fact, the average American household in 2016 has $134,643 in debts, and those with credit cards found that they spend $1,300 per year on interest for the credit cards alone. Once credit cards can run your monthly budget, you might find that you are paying only the minimum and never making a dent in the balance due.
When credit cards are overwhelming your monthly income, you have options. Before filing for bankruptcy, explore these three methods for quickly paying down credit card debt. Of course, if you find that these methods do not work or you have tried them with no relief, speak with a bankruptcy attorney to explore your options.
Use the Avalanche or Snowball Methods
The debt avalanche is a method that has you start with the highest interest credit card first, and work your way down. In theory, it saves you time and money, because you are paying the card with the biggest interest, which means less money wasted on interest over time.
The debt snowball recently became popular with the Dave Ramsey movements, but it has been around for years. With the snowball method, you pay off the smallest debts first to reward yourself. Then you take the funds you put toward the lowest debt and start applying them to the next smallest until you have slowly paid off all debts. You do pay more interest using this method, and you do not pay down debts as quickly, but you might feel more satisfied along the way.
Always Pay More than the Minimum Payment
The minimum amount will never pay off a credit card. Typically, the minimum payment barely covers your interest and service fees; therefore, you will be throwing your payment away. To avoid wasting your money, pay more than the minimum.
For example, your minimum payment is $20, but your interest charge for the month was $30. Therefore, if you pay $20, you have not made a dent in the debt. Try to add the interest fee to your minimum payment at least. In this example, you would pay $50; instead of $20. Then, try to add more – even if just a few dollars per month.
Consolidate Your Debt
Sometimes debt consolidation is the only way to combine your debts into a single payment and interest rate. This helps you pay down debt over time and could lower how much you pay each month toward debts too. Also, you will save on interest rates. Be cautious about companies that offer debt consolidation loans online. Instead, go to your local bank for consolidation.
Is Bankruptcy the Only Option?
Sometimes you try these methods and still cannot get out of debt. If you have lost your job or experienced an illness that makes it impossible to work, filing for bankruptcy could be the only option you have.