Are you tired of being a slave to credit card debt? Do you want to wipe the slate clean and build a fat cash balance in your bank account?
I don’t blame you. Owing money to anyone sucks. Making Mastercard or Visa rich at your expense doubly sucks. Because when you give them the power and profit, you are on the losing side of that equation.
So, if you’re primed and ready to erase that credit card balance once and for all, and regain control over your finances, here are seven ways to do it.
Get a Handle On Your Spending Habits
You can’t change what you can’t see. The reality is that we grossly underestimate our spending over any given period. For example, if I were to ask you how much money you spent and on what the past seven days, you’d probably omit 30-40% of the items.
That’s why it’s very important to gain awareness of your spending habits. I recently coached a woman on building her financial confidence and one of the exercises she had to undertake was to understand where her money was going. She was shocked at how much she was spending on eating out and lattes. Once she was aware, she made a conscious decision to cook more meals at home, recognizing it would save her at least $300 a month!
Go through the past three months of your credit card statement. Take photos of everything you spend money on for a few days. I can assure you that you will quickly see patterns and identify saving opportunities.
Create a Budget
A budget helps you prioritize where you should or need to be allocating your money, and prevents you from overspending on things that are less of a priority.
Many people find creating a budget off-putting, thinking it’s time-consuming or believing it’s too restrictive, but if you do it for a few months, you’ll quickly see the benefits far outweigh the cost of inconvenience. You’ll feel more in control, you’ll have peace of mind, and you’ll reach your goals (which includes paying your debt off) a lot faster.
Pay More Than the Minimum Balance
While you may be tempted to make the minimum required payment on your credit card balance, doing so will cost you A LOT in interest payments and may take you several years to pay off the balance. That’s years and money that you can use towards better things!
Take a look at this chart:
Just by increasing your payments slightly, you can save thousands of dollars in interest and shave off years in cleaning up your debt.
So get aggressive in paying off your debt. It’s short-term pain for long-term gain.
Replace the Credit Card with Cash
Of course, if you’re going to pay down the outstanding balances on your credit cards, the last thing you should do is make more purchases using your credit card, right?
Halt using your credit card and use cash. By using cash, you will spend a lot less because human psychology tells us that we hate parting with physical cash. So you’ll be less tempted to spend. And, you’ll be much more aware of what you’re spending your hard-earned cash on.
Use Balance Transfers to Your Advantage
The premise behind balance transfers is moving your balance from a high-interest credit card or cards to that of a lower interest rate. When you do this, more of your payment will go towards paying down the principle of the balance rather than paying off interest – so you pay down your overall credit card debt faster.
There are several caveats you need to be aware of before considering whether this makes sense:
- You’ll need a good credit history to qualify.
- The amount you’re allowed to transfer to the balance transfer card will be capped at the credit limit, meaning you may not be able to transfer the full amount of your balance (still may be better than nothing).
- The transfer card will likely charge you a fee (normally 3-5%) of the balance in exchange for the transfer. Also, while there may be a no-interest introductory offer for a specified period, the rates may be much higher after the period is over. So you’ll have to determine whether such a move is worth it. Here’s a link to a balance transfer calculator https://wallethub.com/balance-transfer-calculator/
Sell Unwanted Items
Decluttering your home is a great way to raise some extra cash and put it towards your credit card debt. Plus, you’ll feel less stress and create more space. So it’s a win-win.
Items such as kitchen appliances you no longer use, sporting equipment, furniture, books, clothes, CDs, and electronics are just some of the things you can sell on sites like Facebook Marketplace, eBay and Kijiji just to name a few.
Take On a Side-Gig
Why not use your hobby and talent to make some extra money to use towards paying down your debt?
If you can spare some time to pick up a part-time gig, do it. You’ll be in service to others, fuelling your passion, developing new skills and experiences, and bringing in cash. I can’t think of a better way to shrink your debt load.