Americans are in a massive amount of credit card debt, to the tune of over $1 trillion#. The average American has a staggering $6,375 in credit card debt. It’s a problem.
It can be incredibly daunting to stare at high credit card balances, with high-interest rates, and a relatively low amount of money coming in while trying to figure out how to pay off debt. Take a deep breath, it really is possible to make a dent, and set yourself on the path to being debt free.
Here’s how to start immediately!
1. Focus on your high-interest debts first
If you are in the process of paying off a few credit cards at once, chances are all your cards have different interest rates. Focus on the card with the highest interest rate first, and work to pay it off as quickly as you can. While you are doing that, make the minimum payments on the rest of your cards. When the card you are working to pay off does get paid off, move onto your next card with the highest interest rate.
Feeling overwhelmed? Sign-up for Tally, and the app will do the hard work for you. Make payments to Tally, and the app will figure out what payments to make to your credit cards companies on your behalf.
2. Make multiple payments a month
For the most part, credit card companies use your average daily balance to compute interest charges. Instead of just paying a lump sum when your balance is due, make multiple payments during the month so you lower your average daily balance. You’ll not only end up paying less interest, but you’ll get in the habit of paying off as much as you can, when you can.
3. Get a new credit line to pay down your high-interest debts
A great way to start paying off your credit card debts, particularly your high-interest debts, is to sign-up for Tally. If you qualify, you can get a line of credit with a lower rate, so you can pay down your high-interest cards faster.*
Along with that credit line, Tally also wants to help its users manage their credit cards. Simply scan your cards into the app, and Tally will manage payments to your cards every month. They’ll focus on paying down your high-interest cards first, so you start saving money on interest.
4. Ask your credit card companies if they will lower your rates
You’ve heard the mantra, ask and ye shall receive. While that’s not entirely true in the case of asking your credit card company to lower your interest rate, you might as well try. Research has shown that relatively few customers ask for a lower rate, but three out of four who do, get it.
It’s worth asking for a lower rate for every card that you have in your wallet because even knocking a few percentage points off of your interest rate could save you hundreds of dollars annually.
5. Stop using your cards
We know, this is completely obvious, but stop using your cards. Seriously, just stop. If you are someone who has a problem with impulse purchases, do whatever you have to do to make this happen: put your cards in safe space somewhere in your home so you aren’t carrying them around with you (and thus tempted to use them) or even think about physically cutting them up so you can’t use them.
This is important, though, while you should stop using your cards, don’t close your credit card accounts, particularly if the account has a high credit limit or is an old account because that could really impact your credit score.
Feature Image: Unsplash
*Depending on your credit history, your APR will be between 7.9% – 19.9% per year. Similar to credit card APRs, it will vary with the market based on the Prime Rate. (This information is accurate as of July 2018.)