Https Www.Bankrate.Com Financing Credit-Cards Best-Secured-Credit-Cards How to Quickly Crush Credit Card Debt (6 Best Ways)

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How to Quickly Crush Credit Card Debt (6 Best Ways)

If you have a high credit card balance in 2018, you need to make it a priority to pay it off and do it as soon as possible. The reason is because credit card debt is more expensive now than ever before, and if that’s not reason enough, here are some more statistics to fuel your desire to get out of debt.

1. Total revolving debt in the United States as of February 2018, consisting mostly of credit card debt, has reached $1.030 trillion, according to the latest Federal Reserve statistics. This is an all-time high for our country.

2. Interest rates have increased twice in 2018, and the CME FedWatch Tool suggests another rate hike will be made later this month.

You’re about to learn the top six ways to pay off high credit card debt, but before we dive in, let’s first look at the most expensive options you’ll want to avoid.

Most Expensive Credit Card Relief Options

The most expensive credit card relief option is when you only pay the minimum monthly installments. Don’t just make minimum monthly payments on a credit card because you’ll end up paying the maximum amount in interest. For example, if you have a Chase credit card balance of $15,000 and your interest rate is 29%, while only paying the minimum payment – you will be paying a total of $45,408 in interest alone and it will take you over ten years to pay off the balance.

1. The Debt Snowball Method:

The debt snowball method for paying off your credit card balances proved to be the most effective credit card debt relief option in 2018, according to new research published by Harvard Business Review.

With the debt snowball method, you pay off the credit card with the lowest balance first. As soon as the initial credit card balance is paid in full, your available monthly cash flow will increase. You would then use the extra funds to pay off the next smallest account. Once the second smallest account is paid in full, your available cash flow will only increase and continue to grow, just like when it’s rolling in a snowball. Next, use all that extra cash to pay off the third smallest account.

This method works using psychological principles. When someone achieves a goal, such as paying off their first credit card debt—the brain releases dopamine, and it feels good. And you want more than that feeling of joy, so you’re motivated to keep paying off each debt one by one. Before you know it, you’ll start to see the light at the end of the tunnel and your momentum will reach a peak, and in that moment – ​​nothing will stop you!

2. Debt Avalanche Method

The debt avalanche method focuses on attacking the accounts that are spending the most money, namely the accounts with the highest interest rates. If you like math and numbers, you’ll likely go this route, as it makes the most sense from a technical standpoint.

Technically, this route will save you more money than the debt snowball method, if you stick to the plan successfully.

There is much controversy surrounding the argument of which route is more effective, the snowball or avalanche method of debt. Understand both options and then based on your personality type you can determine which route is best for your situation.

Some people may decide to use a combination of these two options. You can start with the debt snowball method, quickly writing off your smaller debts that have a balance of $1,000 or less, and then move on to the debt avalanche method to pay off your remaining balance but in the most cost-effective way.

3. Balance Transfer Card:

You can cut credit card interest rates by using a balance transfer card that does not have interest for 12-18 months. If you are able to pay your balance in full on the balance transfer card during the introductory period when the interest rate is zero, you will eventually lose 100% of your interest and only have to pay the balance transfer card up-front fee.

Make sure your credit card remains open after paying it off because when you close a credit card your credit score goes down.

There is an upfront fee that comes with these cards, ranging from 3%-5% of the balance.

Look around for a balance transfer card that comes with:

Low up-front costs

· 18 month introductory level

Zero percent interest rate

4. Home Equity Line of Credit:

Home equity lines of credit can be used to pay off high-interest credit card debt, saving thousands of dollars in interest. Home equity lines of credit come with lower interest rates than other types of bank loans. BankRate.com estimates that the average interest rate on a home equity line of credit is only 5%.

The downside is that you are transferring your unsecured debt to secured debt, and this can be dangerous because if for some reason you default, you can lose your property due to credit card debt.

5. Get Your Creditors to Reduce Interest Rates

Don’t overlook this next method, because of how simple it is. Sometimes, it’s the simple things in life that are overlooked the most.

Call your creditor and ask for a supervisor. Remind them how many years you have been their client and how impeccable your payment history has been over these years. Now tell them that you are annoyed that they are charging you a high interest rate, and illustrate the offer another bank has made to you. If your credit score improved from when you first applied for that credit card, mention that too.

Do some research and find a credit card company that offers lower rates, and you can then use that as leverage.

Example: “Capital One offered me a credit card with an interest rate of 8% and 1% higher than what you are offering in cash back. Can you lower my interest rate so I can stay with your bank? Also, you will see my credit score has improved from when I first applied for a card with your bank two years ago.”

6. Debt Relief Program:

Consumer credit counseling programs can reduce your interest rates and get you out of debt in less than five years, without hurting your credit score. All of your credit card debt is combined into one consolidated monthly payment and the consumer credit counseling company then distributes the funds each month to your creditors but at a lower interest rate. This program has the least effect on credit scores, compared to other debt relief programs.

A debt settlement program should only be used if you are behind on credit card payments and can’t afford more than the minimum monthly payments. The reason is because these types of programs can drastically lower your credit score and cause negative notations all over your credit report. However, if your credit score is already in a hole, then right now you just need to focus on getting out of debt as quickly as possible and avoiding bankruptcy. Once you are out of debt, you can then rebuild your credit score.

If you’re on the verge of bankruptcy, debt settlement can be an alternative that gets you out of debt in about three years and gives you one affordable monthly payment on all of your unsecured debt.

Need more options to get rid of high credit card balances? Check out this article next.

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