If your credit card's annual interest rate is 18%, that doesn't mean you will be charged 18% interest each year. Depending on how you manage your account, your actual interest rate may be higher or lower. It could even be 0%. This is because interest is calculated on a daily basis, not on an annual basis, and interest is only charged if you have a monthly debt.
If you have a credit card balance every month, it may be easier to pay off your debts faster than you think. The key is to make a good plan and stick to it. These four strategies can help you decide which path you should take to quickly pay off your credit card debt.1. Pay off one debt at a time
Do you have a balance on more than one card? If so, make sure you pay at least the minimum value on each card. Then focus on paying the total balance on one card at a time. You can choose your target card in one of two ways:
Check the interest rate portion of your report to see which credit card has the highest interest rate and then focus on paying off the debt first.
Pay off the credit card with the minimum balance, then take out the money you used to pay the debt and use it to pay back the next smallest balance.
2. Higher than the minimum wage
Look at your credit card bill. If you pay the minimum balance with a credit card, you will have to spend more time paying the bill. If you pay more than the minimum amount, your total interest will decrease. Your credit card company needs to list this for you on your statement so you can see how it applies to your bill.
Simple solution: pay a little more for each month. Every dollar that exceeds the minimum payment will use your balance. The smaller the balance, the more you will need to pay interest.
3. Joint conquest
Consolidating your debt allows you to combine several higher interest balances into a lower interest rate balance so you can repay your debt faster without increasing the amount paid. Here are two common ways to combine debt:
Debt is transferred from the high interest rate card using a low balance transfer rate. Please note that the balance transfer fee is usually 3-5%, but savings at lower interest rates may usually be greater than transfer fees. Be sure to take this into account when considering this option.
If you have equity in your home, you can use it to pay off your credit card debt. The interest rate on the home equity credit line may be lower than your credit card charge. Be aware that closing costs often apply, but the added benefit is that home equity interest payments are often tax-free.
If you do have a merger, remember that it is important to control your spending to avoid adding new debt above the newly consolidated debt.
4. Recalculate the priority of the budget
First classify your monthly consumption, such as: groceries, transportation, housing, and entertainment. Your credit card bill is a useful tool; many card issuers classify your expenses.
Next, find the places you can cut. Then take the money you released to pay off your debt.
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This article is part of a series of articles about understanding your FICO credit score, and we'll delve into each component that details your credit score calculation. In the first two parts of this series, you learned that the payment history and the amount owed have the greatest impact on your FICO credit score. In this article, you will learn about the next biggest factor in the FICO score, the length of your credit history and credit combination.