As we all know, Eliminating credit card debt can take a long time if you don't implement effective techniques. High balances on your credit cards can negatively affect your personal credit score, and some lenders will not approve your request for financing with high debts. If you are planning on eliminating your debt, understand techniques to help reduce the balance quicker.
Credit Card Rate
The interest rate that you're currently paying on your credit card will impact how fast you're able to pay off the debt. Credit card companies charge minimum payments, which are approximately 2 to 3 percent of the outstanding balance. Making this small payment each month pays off the interest charges from the month and a small percentage of the principal. But if you are able to negotiate a better interest rate on the card, you'll pay less in interest each month and more of your payments will be applied to the actual principal, which reduces the balance faster.
Minimum Payments
For the above method to work, it's imperative to pay more than the minimum each month. It can take years to pay off a credit card if you are only making the minimum payment each month. But once you've asked for and received an interest rate reduction, use this as the opportunity to quickly reduce your balance. Make higher payments every month to put a dent in your outstanding balances. For example, a $200 payment can pay off a $1,000 credit card balance in about five or six months -- unlike $20 monthly payments which can take more than four years to pay off the debt.
Highest Interest Rate
Tackling the balance with the highest interest rate first is a key technique to eliminating your credit card balances. The card with the highest interest rate, regardless of the balance, will cost you the most money each month. Concentrate your efforts on paying down this debt first to reduce how much you spend in interest charges each month. Once you've paid off this card, move on to the card with the next highest balance. Take the money you saved from paying off the previous card and use this money to increase your payments on the next card.
Biweekly Payments
Some credit card companies give the option of making biweekly or twice monthly payments online. With this method, you make a credit card payment every two weeks -- at least half of the minimum payments. This payment technique is beneficial because you lower the risk of missing a payment and getting charged a late fee. Plus, biweekly payments can reduce the amount you owe in interest, which results in reducing the outstanding principal quicker.
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