The following is a guest post.
If you currently have credit card debt that is accumulating interest every month, you are giving a lot of money to credit card companies that would probably feel a lot better in your own pockets. It’s important to come up with a plan to eliminate your credit card debt and ensure that you pay as little interest as possible along the way.
Here are a few strategies you can use to reduce the amount of interest you are paying today, which will allow you to pay off your debt faster and stop paying interest as soon as possible.
Stop Spending on Your High Interest Card
If you are still spending money on your high interest credit card, stop! You’re never going to pay down that debt if you keep adding to it every month. The best solution is to pay for everything with cash or a debit card, and just focus on paying off the high interest card.
If you need a credit card, you’re better off finding one with low credit card interest rates. There’s no reason to use your card that is charging you 20% APR when you could get a new one at 12% and use that for your daily purchases.
Get a Balance Transfer
If the interest rate on your card is very high, you might want to consider getting a balance transfer. Most of the time you will want to sign up for a new credit card that is offering a promotional balance transfer APR. Depending on how good your credit is, you might qualify for as low as a 0% rate. Just be careful to pay attention to the balance transfer fee, which is usually at least 3% and possibly more.
A 3% balance transfer fee and 0% APR for a year is worth it if you are transferring debt from a credit that has a 20% APR. The key is to do some calculations and figure out what works best for you.
Bring in More Income or Cut Expenses
The first two options are great ways to reduce the interest rate on your debt, but the best solution is to eliminate the debt altogether. Try to figure out a way to put more money towards your credit card payments, either by making more income or reducing your expenses. If you can double your monthly payments, you will pay off your debt in less than half the time it would take at whatever you are paying currently.
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.