The new year can be a good time to take control of your finances, and for many people, paying off credit card debt is the first step. With new interest charges each month, credit card debt can continue to build if you don't take action.
"Credit card debt is particularly insidious because it could potentially never end," says Stephanie Genkin, certified financial planner and founder of My Financial Planner in Brooklyn, New York.
But if you have a plan, you can make headway on your credit card debt this year. Take these steps to pay off more of your debt in 2019:
-- Stop incurring more debt.
-- Pay less in interest.
-- Make extra payments.
-- Shift your mindset.
Stop Incurring More Credit Card Debt
The first step to addressing your debt is limiting how much more you accumulate. While turning off the spigot won't affect the debt you already have, it can prevent your problem from getting much worse.
[Read: Best No-Annual-Fee Credit Cards.]
Put your credit card on hold. The simplest way to stop adding to your credit card balance is to stop carrying your credit cards. It's also a good idea to remove saved credit card information from your internet browser and online shopping accounts. If you can't easily access your cards, it's harder to add to your debt.
Re-evaluate how you spend. Depending on how serious your credit card debt is, you may have to make some significant sacrifices. Look through your expenses and see where you can make some easy changes. "Do an audit of your credit card's automated expenses," says Genkin. Look for subscriptions you no longer use or purchases you make out of habit but don't get much benefit from. Cut these first.
Next, take a look at the rest of your spending. Be ready to cut back in nonessential expense categories. However, set aside some money in your budget to continue to make an occasional purchase or two that you really value or enjoy. This is key to staying motivated to pay off your credit card debt.
Pay for things with cash. Studies show people are willing to spend more when paying with credit cards than with cash. Also, when you pay with cash, stores don't need to pay credit card processing fees, which may allow you to negotiate a discount -- depending where you live.
Consider building an emergency fund. An unexpected expense can cause you to run up your balance again, derailing your efforts to pay off your debt. Building a small emergency fund could help you stay on track.
"If you don't have an emergency fund, the first time you get hit with an emergency you're going to be forced to go back to credit and then you just get in a vicious cycle," says Michael Dinich, financial advisor at Your Money Matters in Sayre, Pennsylvania, and founder of personal finance blog Your Money Geek.
At the same time, if you have a lot of debt and a high interest rate, you might be better off paying down your debt first. Make sure you research what strategy would work best for you.
Pay Less in Interest
The lower your interest rate, the more you can put toward paying down your principal each month. Here are some strategies for paying less in interest.
Ask your card issuer for a lower rate. Call your credit card company to see if you can get a lower interest rate. Be ready to quote competing credit card offers and provide other reasons the company should lower your interest rate. For example, you may want to remind the representative how long you've been a customer or that you've always made on-time payments.
Despite your efforts, your credit card company might not lower your interest rate the first time you ask. Genkin suggests calling back to see if you can get a better answer from another agent. Or politely ask to speak to a supervisor. If you're still denied, try calling back in a few months after continuing to make on-time payments.
Consider a zero percent APR balance transfer offer. Credit cards with an introductory zero percent annual percentage rate on balance transfers offer another way to lower your interest rates. These promotions can last as long as 21 months. When transferring a balance from one card to another, you will probably have to pay a balance transfer fee. These fees typically fall in the 3 to 5 percent range, with a minimum of $5 to $10. But don't let a balance transfer fee scare you. A 5 percent fee is still lower than what you're probably paying in interest.
But with your old credit line free, you may be tempted to make new charges on the original credit card, making your debt situation even worse. Even if you avoid this common pitfall, you'll pay the regular interest rate on any balance that remains after the zero percent APR period expires. This rate may be higher than what you were paying with your last credit card.
[Read: Best Balance Transfer Credit Cards.]
Consider loans with a lower interest rate. P ersonal loans, home equity loans and home equity lines of credit may allow you to consolidate your debt under a lower interest rate. It's a good idea to prequalify for loan products so you can check what interest rate you will pay.
As with balance transfer offers, you can get into trouble if you move your debt to one of these loans and then run up balances on your credit card again. And you may have fees on top of that, such as loan origination fees. But if you can avoid temptation, a loan may offer interest savings that allows you to pay off your debt much faster.
Make Extra Credit Card Payments
Making extra payments on your debt reduces the principal you owe and, therefore, the interest you pay each month. There are two popular strategies for how to apply any money above the minimum payments due: the debt snowball method and the debt avalanche method.
The debt snowball method has you putting additional payments toward the credit card with the smallest balance. The idea is that if you're able to pay off a credit card quickly, it could give you the momentum you need to pay off the rest of your debt. The debt avalanche method has you applying any additional payments to the credit card with the highest interest rate, which can help you save more on interest and pay off your debt faster.
Once you pay off the first credit card using either method, pay off the next card using the same philosophy. As you pay off each card, the monthly payments you make grow.
Either method can be effective, so decide which approach motivates you the most. Unless you have an extreme situation, the debt avalanche is usually only a few months faster than the snowball method, says Genkin.
[Read: Best Zero Percent APR Credit Cards.]
If your budget is so tight that you can't afford to make additional payments, consider picking up extra shifts at work, taking a part-time job or even starting your own business. You can also supplement your income by selling items around your house that you no longer use. Though, keep in mind there might be tax implications for earning extra income.
Shift Your Mindset
Even if you've paid off your credit card debt, it can be easy to slide back into old habits. It's important to change how you think about credit cards so you don't end up in the same spot.
After you pay off your credit cards, you have to make it stick. Don't use credit cards for purchases you can't pay off quickly. If you struggle to use credit cards responsibly, it may be a good idea to stop using them altogether.
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