If you find yourself with large amounts of credit card debt and multiple cards to pay down, you’re not alone. You may feel overwhelmed and stressed with the thought of how to pay them off. Here are some powerful tips to help you pay off multiple credit cards quickly.
FIRST: Set Up Recurring Minimum Payments on All of Your Cards
When trying to pay down debt, you don’t want to get behind on your payments. Late fees will only add to the debt. Create automatic repayment for each lender, through your bank’s bill payment service if available. Pay at least the minimum payment every month, on time, to avoid late fees and additional charges. This not only keeps you current but helps to maintain your credit score.
Once general repayments are set, you need to implement a strategy to quickly reduce the principal debt amount.
Tackle One Account at a Time
How do you pay off multiple credit cards quickly? One account at a time. While making minimum payments to all accounts, pick one account to target for a quicker payoff, once its paid off move to the next debt and so – see below.
Choose Strategy A or B: Lowest Balance or Highest Interest Rate
Whilst there are numerous DIY debt reduction strategies available, two of the most popular and effective methods focus on low balance or high interest debt.
A. The low balance strategy: Prioritise your debts in order from lowest balance to highest. As mentioned before, make the minimum repayment on all debts except for the one with the lowest balance. Pay more than the minimum on the lowest balanced debt. If multiple debts have the same balance, focus on the one with the highest interest rate. Once the first debt is paid off, focus all extra money on the second debt and so on.
B. The highest interest rate strategy: Prioritise your debts in order from the highest interest rate to the lowest. As mentioned before, make the minimum repayment on all debts except for the one with the highest interest rate. Pay more than the minimum on the debt with the highest rate. Once the first debt is paid off, focus all extra money on the second debt and so on.
Stop Using Cards as You Pay Them Off
The quickest way to sabotage your efforts is to use credit whilst paying paying debt down. Becoming and staying debt free requires discipline and a commitment. Closing credit cards once they are paid off will also eliminate the temptation to spend again. This can also save you money on annual fees which may be attached to the card.
If you’d like to keep a card active for emergencies, ask for a lower rate on the card and request a limit that is adequate for your needs.
Depending on your situation, a credit card balance transfer may be a great reduction strategy. Taking advantage of ‘zero percent’ or low rate balance transfers is a great way to tackle the principle amount of debt and save even more in interest repayments.
Do be careful of promotional periods and terms. In many cases the lower rates are only applicable to the transferred amount and not on new purchases.
*This article is opinion only and should not be taken as financial advice. The information is general and has not taken into account your objectives, financial situation, or needs. Check with a financial professional before making any decisions.