When we use them wisely, credit cards can be an excellent tool for managing money. However, it is all too easy to rack up consumer debt. Average credit card interest rates are about 19.99%. If you don’t pay off the full balance every month, you can accrue high interest charges. We have found 3 tips to help you get out of credit card debt.
Create a plan for debt payment
People often find that tackling credit card debt is difficult. However, no matter how much you owe, if you have a prepared debt payment plan you handle it.
A debt payment plan is just as it sounds. You create a plan for the payment, you stick to it, and eventually you will pay the debts off. Choose between the debt avalanche method and the debt snowball method to help you get out of credit card debt.
With the avalanche method, your focus is on the debt with the highest interest rate first. It does not matter the amount you owe on it. Let’s say you have $2.500 in credit card debt at 20% interest, $30.000 in student debt at 4%, and $1,000 line of credit at 6%.
With the avalanche method, you pay the highest debt first by making payments larger than the minimum due. Pay the lower balances with the minimum. With the avalanche method, focus on the credit card debt and pay the minimum amount due on the other accounts.
If your priority is having accounts with the fewest number of debtors, you should use the snowball debt method. This way, you pay of your smallest debts first. Using our example above, focus on the credit line first as you make minimal payments to the other debts. The idea here is to eliminate the smallest debts first so you have incentive to pay off the other debts.
Use a low-interest credit card
As we have said, a typical credit card interest rate is 19.99%, but there are credit cards with low interest. You can use these to reduce the amount of debt you owe. Look for cards that have low interest rates for balance transfers.
The Scotiabank Value® VISA* card is the most popular low-interest credit card on the market. This card has a low annual fee of $29. You also receive a 1.99% introductory interest rate on balance transfers for the first six months.
Click here to Apply for the Scotiabank Value Visa card
Switch to cash
It is important to reduce interest payments on credit cards. However, it is also important to recognize how you got into this debt in the first place. Usually, this is due to too much spending. With use of credit cards for expenses, we spend even more and think money has no limits.
This is because we do not actually SEE the money leaving our account, like paper money. With credit cards, spending money is the easiest thing.
When you make the switch to using cash for expenses, you physically see the money leave your wallet and bank account. You are less likely to spend hard earned money recklessly. With cash use, you get a proven way to reduce spending.
It is discouraging to have debts. However, you can plan a strategy for debt payment. In almost no time, you will have no debts.