Many American credit card users end up paying just their minimum credit card payment each month, instead of making a full payment that would leave them free of debt.
But while paying the minimum amount each month is convenient in the short-term, it could leave you with a staggering amount of debt in interest charges over time.
People stack up huge debt for a number of good reasons, such as paying for emergency surgery or losing a job. However, it’s important to know that credit card debt negatively affects your credit score, which is used by lending organizations to determine whether to lend to you or not.
A high credit score makes you a reliable borrower, and lending companies are likelier to allow you to borrow money at low interest rates. That being said, here’s how you can get rid of credit card debt:
One card at a time
If you have multiple credit card accounts you need to pay off, focus on one at a time. You can do this in two ways:
- Make the minimum payments on the rest of the accounts while meeting the full payment on the account with the lowest debt. This will help you feel like you’re making a significant change with regard to debt reduction.
- If your top priority is a good credit score, start paying the maximum amount you can on the card with the highest rate of utilization. A good rule of thumb is to use under 30% of your credit card limit and pay it off in full each month.
Request creditors for lower interest rates
If you’re generally a dependable borrower and have gone into debt because of unforeseen circumstances, you can call your creditor and ask for a lower interest rate.
Lending companies usually agree to lower your interest rate if your credit score is above 730. A one or two percentage point reduction could save you hundreds of dollars annually.
Transfer your balance
If you switch to a card that has a lower interest rate, you could end up saving hundreds of dollars annually.
However, you should exercise caution. Transfer balances only if you’re sure you can pay the debt off within the introductory low-interest period. This period differs from company to company, but usually lasts one year to eighteen months.
Hire a credit repair service
If you’re in credit card debt and have a credit score below 670, lenders won’t often let you borrow credit at competitive rates.
Our credit repair services in the USA scrutinize your credit reports for errors and dispute them with the relevant organizations.
We negotiate with lenders on your behalf as well. The entire process of repairing credit generally takes us just three to four months.