Many customers struggle with credit card debt. Although getting yourself out of credit card debt can be challenging, it is possible. It just takes focus, proper guidance, determination, and a plan that works with your financial situation.
Here are some simple rules to stay debt-free:
Cutting up Credit Cards.
An empowering choice for many, physically destroying your credit card means that you are making a change from how you have used your credit previously. It is an act of small commitment to pay off your debts, creating a small barrier to using your credit account(s) in the future. You cannot have the card for in-person purchases, but your credit card company can send the replacement card at any time when required.
Come up with cash.
You can come up with cash to cut off the credit card debt. There are two options to accomplish the same. One is to cut down the monthly expenses, and the second is to boost your monthly income. The ideal goal is to develop a fixed amount to slowly pay off the credit cards.
Assess your financial situation.
The most suitable way to stay debt-free is to analyze your present financial situation. You have to create a list of everything you owe, including monthly salary, monthly expenses, bills, and credit card debt. Thus, you can quickly get the annual percentage interest rate for each credit card, which helps to make a budget plan for the month.
Prioritize the credit cards.
If you have more than one credit card debt, you must prioritize. There are three main strategies for the same. The first strategy is the avalanche method, which involves paying off your balances with the highest interest rates. This allows you to get rid of your debt quickly and efficiently. The second method is the snowball strategy, which first involves paying off the smallest balance. Credit card debt would be paid off faster as you move forward with this method. The third is the blizzard strategy involving both the avalanche and snowball methods. This strategy combines paying off the smallest balance first and then paying off the highest interest balance.
Get a balance transfer credit card.
If you have a high credit score, you are eligible for a card that helps you pay down your outstanding balance shortly. The advantage is that balance transfer credit cards offer 0% introductory annual percentage interest rates for a promotional period, typically between 12 to 18 months.
Opt for cheaper loans and EMIs.
Usually, the rate of interest on a credit card is higher when compared to personal loans. You could thus consider a personal loan for three years if you are in a situation to service it. Other than loans, you could also go for monthly installments or EMIs with lower interest rates.
Consider drawing a debt timeline.
It would be helpful to draw a debt timeline for yourself to know how long it would take you to bring each balance to zero. You do not always have to stick to the timeline. It can get revised anytime when a purchase is made unexpectedly.
Go for a Debt Management Plan (DMP) or Consumer Proposal
If you cannot manage your credit card debt, the best option is to go for a debt management plan or a consumer proposal with the help of expert advice from a Licensed Insolvency Trustee. A DMP is a service proposed by non-profit credit counselling agencies. Even though the plan includes a small fee, a DMP helps you negotiate with your creditors a lower interest rate on your debt and crystallize all your credit card payments into a single monthly payment. A DMP also encloses counselling assistance and financial education at no extra cost. The next option is filing a consumer proposal which is possible only with the help of a Licensed Insolvency Trustee. If your creditors accept a consumer proposal, it can drastically cut down the principal you have to repay, reducing one-third of the original debt.