Debt is something every person wishes to avoid considering the complications it presents. Stress is the number one complication debt presents because you would have to worry about how you will pay it and where to get the money from. The stress would then grow if your debt grows the more you spend or need money.
One has many options to choose from when it comes to paying debts. One can borrow money from family and friends, while others can seek personal loan plans from moneylender companies or banks.
Credit cards are also used to pay debts, especially if they are for emergencies and critical necessities. While you will be able to pay off your essentials, you will need to pay back the credit card company for what you spend. As a result, you may end up in debt even more.
If you are having trouble paying off your credit card bills and don’t want to deal with getting the banks at your heels, here are some tips to get you started:
Cut costs and reduce extra spending
When you are in debt, it is ideal you stop purchasing random items that you do not need immediately to save up some cash. You would be surprised on just how much you can spend per month by cutting down on the luxuries you splurge on with your card. Use the money you would have paid for these luxuries to pay for your debt!
Pay the Minimum Repayments Every Month
If you do not have a large salary every month, you could pay your credit card debt’s monthly minimum payment. Paying the minimum amount reduces the chances of you incurring a late payment fee, but you will still need to worry about the interest rates. Usually, the monthly interest rate is 3%, but it does vary depending on the bank.
When you decide on doing minimum repayments, it is ideal you do not use the card during it. If you do, you are just reducing the possibility of getting your debt paid in full.
Pay the Bill in Full
Usually, people see credit cards as fast money and forget that it does have limits. They would keep swiping the card for various things until they use their entire credit limit. Once they get their monthly bill, they would only pay the minimum monthly to keep the card active.
Unfortunately, as stated above, you will still need to contend with the interest fee. As a result, you are paying more for what you actually used.
It is always good to pay credit card bills in full if it is possible to prevent the principal amount from growing due to monthly interest rates. It also ensures you have a clear credit rating and a clear card to back up on when you are in need of immediate funds.
Use the Snowball Method or the Avalanche Method
If you have various bills alongside your credit card bills, you can use the snowball method to organize which debt you can pay in full first. With this method, you can pay the debt with is the smallest amount in full first then move to the next debt on your list.
Alternatively, you can try out using the debt avalanche payment method to pay off your credit card bills. With this method, you focus on the debt which has the highest interest rate and pay it in full first. Once the first debt is paid in full, use the money you save from its monthly to pay the next debt in the list.
Apply for Personal Loans
Another good way to pay your credit card bill is by seeking personal loans from banks or moneylender companies. You can use the loans to pay off your credit card bills in full and just focus on paying the loan repayments after. Personal loans can also be used for other needs, not just for debts so if you have a spare from the money you borrowed, you can use it for your other needs.
Before checking out personal loans, make sure they do not have prepayment penalties if you will be able to pay it off completely when you collect the funds.
Consolidate the Debt into One
If you have many credit cards billing from various banks, you can seek for a debt consolidation plan to combine all your credit card debts into one. If you decide to use this method, you would need to have a savings account if you want the bank to consolidate it for you. Moneylenders can also consolidate all your credit card debts.
When you settle in this method, the bank or the financial institution you sought assistance from would be paying your bill for you. You would now need to pay the institution in question monthly for the amount they paid to pay all your debts.
Ideally, you can use this method when your debts are now 12 times more than what you can earn monthly.
On the other hand, you can transfer all your credit card balances into one new card with a low or zero interest rate. Many banks in Singapore offer this service to their clients. You can get a new card with another bank then use the card to pay your old credit card bills.
However, the zero interest or low interest rate offered by these new credit cards would only last up to 6 months. It is enough to help you locate other ways to pay your debt. You may also need to wait up to three weeks or more to get a balance transfer plan to work.
Prevent Going Back into Debt
Debt can happen at any time, especially after you pay off all your existing credit card debts. Before it happens, you should create a plan that would help you manage your debts and ultimately pay them in full.
If you do not want to rely on your credit cards to make important purchases or pay emergency expenses, look for other options to fund them, like checking personal loans from a moneylender or bank or borrowing money from relatives.
Do not waver when you find yourself in debt because there is always a way to pay them. Debt-free life is close at hand, just focus and you will be able to do it!