Lat week, I wrote about this last tail end of paying off my credit card. This week, I’m sharing the tips and strategies I’ve used to get to this point. While it seems like there are a thousand opinions on the best ways to pay down your debts, I will simply be sharing what has worked best for me (and hopefully for you, too).
Below you’ll find 5 strategies I have employed to help aid me in getting out of debt. To start, if you are currently in debt and have never heard of or listened to Dave Ramsey, you’re doing something wrong! He pretty much specializes in helping people pay off their debt and then go forward to make the changes they need to, to save and be prepared for the future.
I have used the resources on Dave Ramsey’s website and I try to squeeze in as many of his podcast episodes as I can — I’ll provide a link to a relevant episode for this below!
Here are my top 5 tips to pay down your debt.
Utilize Dave Ramsay’s Debt Snowball Method
This is essentially a way to methodically pay off multiple sources of credit card debt. The basic idea is you begin with the smallest amount you owe and aggressively pay that one off first, while paying the minimum payments on the rest of your cards.
Once you’ve paid that first, smallest amount off, you move to the next, bigger amount and repeat the same process — aggressively paying off that one while making minimum payments on the remainder.
Why this works: Many people try to pay off the debt that has the MOST interest incurring on it — which makes sense logically. However, being able to focus on the smallest debt amount you owe and getting that one out of the way gives you a sense of accomplishment and motivation to keep going. If you start with the biggest, most intimidating amount, it’s hard to see progress and stay motivated for the long amount of time it takes to keep going.
Making this process as easy and manageable as possible will allow you to get on through that debt in a methodical way.
Pay more than your minimum payment, when you can
Making just your minimum payment is the perfect way for the bank to keep you in debt for pretty much as long as possible. This way, you’re essentially just paying the interest charged on your card and never actually making much progress (or any) towards paying off what you owe.
Listen, I KNOW sometimes you can only afford to make the minimum payment — I’ve definitely been there. But do your best to pay even slightly above the minimum payment and throw whatever extra money you have at your credit card, even if’s only five bucks at a time.
Paying just the bare minimum will keep you in that paralyzing debt for as long as possible.
Call your bank and ask for a lower interest rate
I just heard this tip from Hello HENRYs (they have a TON of other great resources, too) and did some research on it. Some people have had great success by simply calling and asking their bank for a lower APR on their credit card.
When you call, make sure you can demonstrate you make your payments on time and tell them you are aggressively trying to pay off your credit card. Make sure you know what your current APR is, you can check it online on your credit card statement. Then, check what the average is, I did just that by reading this: Average Credit Card Rates
There are also several good scripts you can use when calling your bank, I used one and made my own version by tweaking it a little, but sticking with the main components.
Here’s the script I used: How to Ask For a Lower APR Script
I tried this this week and was told a firm, “no,” but I will be trying again next month — sometimes persistence pays off in these cases.
After talking to a few other people about using this strategy, I have been told that it works “every time” for them! So, just because it didn’t work for me (this time), doesn’t mean you shouldn’t try it this week!
DON’T consolidate your debt
Debt consolidation means you are combining ALL of your debts into one, bigger debt. The reason this appeals to people is because then they only have one payment to worry about, and the debt consolidation companies often promise too good to be true results.
This is always SO tempting and those bastards make it sound like it’s the perfect solution to all your debt problems. BUT, here’s the problem with most debt consolidations — you are not always guaranteed a lower interest rate and sometimes they push that introductory offer of a low interest rate that eventually turns into a bitch of an interest rate.
The other trick they like to pull after consolidating your debt is to make your payment lower. BUT, we all understand how basic math works here, right? You now have one, BIGGER amount of debt, and you’ve been told you can make SMALLER payments? Everything about that is dumb and you’ll be in debt even longer this way!
5. balance transfer
Here is another kinda gimmicky way people try to pay off credit card debt. A balance transfer is when you take your balance from one credit card and transfer it to another credit card. You will usually pay a fee for doing this, but that is dependent on which bank or card you’re transferring to.
If you plan on being in debt for a long time, then this may be something you should look into. But, if you are trying to pay that bad boy off in a timely fashion, usually the interest you’re paying doesn’t make a huge enough difference for you to do this.
This week’s resources:
My current total debt: $478.99