3 Ways To Pay Down Credit Card Debt

Credit cars that carry debt which should be cut.

There is no bigger drag on a persons finances than credit card debt. With interest rates often over 20 percent, it is a huge burden and carrying this debt is literally like throwing money away each month.

Make it a point this year to pay down and hopefully pay down that credit card debt completely. If you are up for the challenge, here are 3 proven way to get rid of this debt and cut your monthly budget.

Get A Low Interest Consolidation Loan

If you have good credit, a consolidation loan is always a good option to pay down credit card debt. Note that this is only going to be a good option if yo have a decent credit score. With a low score, the interest on this loan will likely be as much as you are paying on your credit cards, making it a waste of time. With good credit however, you can pay a third of the interest and throw away less money each month.

There are several benefits to a consolidation loan.

  • Lower Interest
    You could pay  less than a third of the interest that you are currently paying. That could save you hundreds of dollars in interest every year, money that you can use to pay off your debt faster.
  • Lower Payment
    Your required fixed payment would likely be less than your combined minimums on your credit cards.
  • Improved Credit Rating
    In most cases, your credit rating will increase. This is because your credit utilization ratio on your cards will go down and the new installment loan will add diversity to your credit profile.

There are two things that you should keep in mind if you go the consolidation route.

First, do not close the credit cards you pay off unless they have an annual fee. Doing so would drop your available credit and could decrease your credit age. Keep them open but do not use them. If a card has an annual fee, see if you can have the fee removed before you close it.

Next, keep in mind that you can pay more than the minimum on your new consolidation loan. It would be a good idea to add up all of the minimum payments on your aid off cards and pay at least that much each month. This will allow you to get rid of that debt quickly.

Use The Debt Snowball Method

If a consolidation loan is not a good option for you, it is time to do things the old fashioned way. You will just have to pay that money down as fast as you can. One way to do this is with a method called the “debt snowball method”.

This is really just a motivational tool, but it works. You need motivation when facing a mountain of credit cards.

With this method, you take all of your cards and organize them by their balance. You then pay the minimum payment on all of your cards, except one. You will pay as much as you can each month on the  lowest balance card until it is paid off.

What you are doing here is motivating yourself to keep going. By attacking the lowest balance card first, you will get a card paid off faster. Seeing a card paid in full will motivate you to keep moving forward.

Once you have a card paid off, move on to the next lowest balance credit card and keep on going.

Use The Debt Avalanche Method

If you are a bot more disciplined and lean towards the logical side, the Debt Avalanche Method may appeal to you more. This method is all about maximizing your dollar but it might not be as motivating.

With this method, you will take all of your credit cards and organize them by interest rate. Again, pay the minimum on all cards but one. This time, it will be the credit card with the highest interest rate. Since this is not necessarily the card with the lowest balance, it may not be as motivating but it will use your dollars more effectively.

By paying down the highest interest card first, you will reduce the amount of total interest that you pay. This will save you the most money.

Just like with the other method, keep paying as much as you can on the chosen card until it is paid off. When it is, pat yourself on the back and move on to the next one.

To Sum It All Up

It really doesn’t matter which method that you use to pay down your credit card debt as long as you take action. With the average American carrying close to 10,000 dollars a month in revolving debt, it adds up to quite a lot of wasted money. With the average credit card interest rate sitting at 17 percent. that is 1700 dollars a year or over 140 dollars a month in wasted money. Money that would be doing much more for you in an investment account.

4 Ways To Trim Fat Off Your Budget

A home that you can cut expenses on.

These days it is more important than ever to cut the fat out of your budget. With a slow economy and an uncertain future, saving is crucial. Luckily, most people have a lot of room to make some cuts. Take a look at 4 easy areas where you can do some trimming.

Entertainment Expenses

There is usually a lot of fat in the entertainment budgets of most people. Sure, all work and no play is not a way to live, but you can make some sacrifices to save money.

First and foremost is cable or satellite. If you still have a subscription television service, cut that cord. Switch to a streaming service instead and change the way that you consume TV. Streaming allows you to watch television on your own time while also catching up on all of those old shows and movies. Even better is the fact that it costs a fraction of what satellite costs. The average cable bill is over 100 dollars while services like Netflix and Hulu are less than 10 dollars.

Next, take a look at how you have fun and look for cheaper alternatives. Like live music, check your local city governments calendar and look for free concerts in the park. Want to go see a movie, visit the dollar theater instead. There are all sorts of free or low cost ways to entertain yourself if you get creative and do a little research.

Finally, do you like dining out or going to the bear for a few drinks. It is a great way to catch up with friends but there are some alternatives. Remember that your friends are probably in the same situation as you. Team up and do pot luck dinners or take turns hosting BYOB get togethers.

Food Expenses

The next easiest area to make cuts is with your food budget. This is not saying that you need to go hungry, but you can make some smart choices.

For starters, you should start brown bagging it to work. Fast food meals generally average 8 to 10 dollars and are as unhealthy as they are expensive. Take our lunch for 1 to 2 dollars a day and save almost 200 dollars a month. As side benefits, you might lose a little weight and will save all of that time you have been spending waiting in line.

Lunch is just the beginning with food savings though. There are two other meals in a day that you can save on. Do so by taking up meal planning. All that you need to do is plan out your meals for the week, all of them. Then, you can write out a grocery list of exactly what you need, minus what is already in your pantry. This allows you to cut out the waste. Since most Americans waste 10 to 20 percent of the food they buy, this is significant money.

Wrap up your food savings by switching to lower cost foods. Sounds bad, but you can still eat well with low cost foods. Staples like potatoes and rice can be serves for just pennies a serving. Even better is the fact that you can make dozens of different meals with these foods. You will cut expenses and never be bored.

Vehicle Costs

Now, let’s turn out attention to your car or truck. You spend a lot of money in this category and there is likely some room for improvement.

First, you need to shop your car insurance. This is especially true if it has been more than 2 years since you have done so. Insurers like to nickle and dime your rates up over the years. You start out paying 150 dollars a month and before yo know it, your monthly rate is over 200 dollars. Get quoted from at least 3 insurers and you might be surprised at how much you can save, especially with new customer discounts.

After insurance costs, take a look at your car payment. Is there room for improvement? If your credit rating has improved over the years or if you financed at a dealer, you are likely paying more than you need to. Even a small reduction of just 1 or 2 percent can help you cut expenses greatly and there are usually no costs in refinancing.

Home Expenses

Home expenses can be a bit trickier to save on, but the effort is well worth it.

If you want to save the most money, a big change may be in order. Renters have it the easiest if they want to save. If you are at the end of your lease, consider moving to a cheaper home. Sacrifice a few amenities or a little space for a potential monthly savings of hundreds of dollars.

Home owners can also save but it takes a lot more paperwork. Refinancing your home could save you a good deal of money by stretching out your loan a little longer or even saving you on interest. If you want to go to the extreme, sell your home and purchase a more affordable space. You could even use some of your proceeds to pay off credit card debt or boost your savings.

Besides your physical housing costs, there are other ways that you can save on home expenses. Shopping your home owners or renters insurance is one way. Another is to cut your utility expenses. Install a programmable thermostat or, if you are deregulated, look for a cheaper electric provider.

Being Savvy

There you have it, 4 ways to cut expenses in the new year. Most of them will barely affect your quality of life but can save you big and let you improve your financial position. Take action now and make it a better year.