Cutting your credit card balances and the amount you have to repay on them is important and can provide you with greater financial freedom. Here are some tips on doing so.
Negotiate A Better Interest Rate
Reducing your interest rate can go a long way toward helping you pay off your credit cards more quickly. Even a small reduction in the amount of interest that you are paying can save you a ton of money over time as you work to pay off your debt. Negotiating with your credit card company is easier than you might think. Typically, all that you have to do is pick up the phone and call them. If you ask nicely, they may grant your request and offer you a lower rate – especially if you have a track record of paying your bills on time.
Even if it doesn’t work, it doesn’t take much effort. If it does work, however, it could wind up saving you a ton of money and could help you pay your cards off more quickly.
Keep Track Of Your Expenses
Tracking your everyday expenses is essential if you want to come up with a detailed budget. You should keep track of everything that you spend money on for at least a few weeks – preferably for a month. This includes everything from your regular bills to extra expenses such as going to a movie or enjoying a meal out.
You can also go back through some of your old bank statements, taking note of exactly where your money went. This will help you spot areas where you may be able to cut back and can allow you to put together a monthly budget that will keep you on track. Consider investing in personal finance software program to make tracking your expenses easier.
Put Together A Budget
Once you know where your money is going, you can find ways to cut back. Remember – creating a budget isn’t about living a spartan lifestyle. Instead, it is about finding ways to spend your money wisely. You don’t have to make huge changes to see a big difference in your finances. Something as simple as dining in instead of eating out one night each week could make a huge difference. You can also make small changes like investing in a programmable thermostat to reduce your monthly utility costs. If you make enough of these tiny changes, it can add up to significant savings over the course of a year. This can provide you with extra money that you can put into savings for a rainy day.
The first step in this process is to evaluate your expenses to find places where you are spending more money than you need to. Be sure to keep track of how much money you are spending so that you can see whether or not you are sticking to your budget and whether you need help with outstanding debts.
Decide How You Are Going To Pay Off Your Cards
There are a couple of different approaches that you can take when it comes to paying off credit cards. The first approach is to focus your attention on whichever credit card has the highest interest rate, putting any extra money toward that card each month. For your other cards, you just pay the minimum amount that is due. After you pay off the first card, you then move on to the card that has the next lowest interest rate, applying the same strategy until all of your cards are paid off.
The other option is to start with your credit card that has the lowest balance, focusing on paying it off as quickly as possible. Once it is paid off, you can apply the money that you were spending on that card to the card that has the next lowest balance. Again, when you pay that off, you can add that payment in with the others and apply it to your additional cards, working your way up toward your highest balance until they are all paid off.
All that you have to do to become debt-free is to decide on one of these strategies and then put it into action. As long as you stick with your plan, you should have your cards paid off before you know it.