So, you got into financial trouble again. Your credit card bills are piling up, even though your card is only used for emergencies ten times a month. It happens to every one of us who has a credit card.

The fact is you avail of credit card services only to use in case of emergencies. Then you tend to enjoy the initial APR offerings and lower interest rates and go crazy with your shopping sprees. But, once the offers on your credit card expire and higher interest rates start to apply, your high-flying, limousine riding dreams come crashing down. And now you are worried about how to pay off credit card debts.

Most of us in the US have, at one point in our lives; have faced “credit card debt” issues. Credit card debts affect your credit score and ratings, and you encounter financial turmoil that can result in bankruptcy. 

Minimum monthly payments help in the long run. But, till you clear all your debts, you have paid double interests, and you have spent an average of 10 years of life settling on your debt. 

There are traditional methods defined below on how to pay off your credit card debts. But, all of them are beneficial in the long run, and some of them may even cost you more money than the actual debt.

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Traditional Methods | How to Pay off Credit Card Debts:

Balance Transfer:

This balance transfer strategy will help you if; you have a good credit score and you have multiple credit cards in use. 

In this traditional method of “how to pay off your credit card debt,” all you need to do is check which one of your multiple credit cards has the lowest interest rate. 

You will need to contact the service provider of that credit card and transfer all the debts. In some cases, financing companies offer 0% APR on balance transfer facilities for up to 24 months, helping you pay off debts with the least amount of applicable interest.  

You can use the balance transfer method; to significantly reduce the interest rates.

Some companies charge a balance transfer fee for such facilities, so we will suggest reading all the offer documentation and clearly understand it before signing any agreement. 

Personal Loan:

Personal loans are another traditional method of “how to pay off your credit card debt” in one stroke. The First thing in this scenario is to search for the right financial services provider who can provide you with a personal loan that is sufficient to pay off all your credit card debts at a comparatively lower interest rate. 

Taking a personal loan will consolidate the different interest rates and debts into one figure and interest rate. It will make accounting easy, and you will have to spend much less on interest payments than you would have to pay in case of higher interest rate credit cards. It will significantly reduce the number of transactions and amount you have to bear in a month at comparatively lower interest rates.

Financial services will ask you to submit all the details of your credit cards and debts. And can pay to the credit card company directly. 

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Debt Settlements:

A sincere financial advisor will tell you that debt settlements are the final straws to grasp before filing for bankruptcy. The fact is debt settlements can cause significantly more than your actual debt and is only feasible if you can make a lump sum payment to your creditors. 

You will need the services of a debt settlement company. The company will negotiate with the creditors on your behalf to reach a consolidated amount that is less than the amount of your debt. The settlement company will charge you for their efforts which are a substantial figure on its own. We advise that if you know the financial matters, try to negotiate a deal yourself. 

In debt settlements, the creditors usually agree to accept partial payments and writeoff your debt. Remember, creditors only consider such offers after careful consideration of your financial turmoil.

Bankruptcy

Bankruptcy is your last draw against settling your debts. Defined by Investopedia, bankruptcy is a legal proceeding involving a person or business which is unable to repay its outstanding debts. The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor’s assets are measured and evaluated, and the court can use the assets to repay a portion of outstanding debt.

There are two different kinds of bankruptcy. Chapter 7 bankruptcies will surrender any of your personal property for settling the debt and allows you a time of about a year to pay off all your debts. Chapter 13 bankruptcies, on the other hand, will not consider any of your assets and will allow a time of up to five years to settle all of your creditors. 

You need the services of your lawyer for filing bankruptcy. And the court will decide on a minimum monthly or yearly payment for clearing the debt.

Unconventional Methods | How to Pay off Credit Card Debts:

The above explained are some of the traditional methods of how to pay off credit card debts. 

The following methods are more modern in approach towards settling your debts. They also do not require the services of any third party.

The Snowball Method

Have you ever heard of the snowball effect? No. Let us quote Wikipedia in the matter. Wikipedia states, “Snowball effect is a process that starts from an initial state of small significance and builds upon itself, becoming larger.” 

In this method, if you have multiple credit card payments, list them in ascending order from the least amount to the highest. Remember to make minimum payments on all of them. 

Then gather or squeeze whatever extra money you can and attack the small figure of the debt. Start settling the smallest debts one by one. 

As you keep targeting and settling the smaller debts, each smaller target is much more achievable. After paying off the smallest debt, concentrate the excess money you now have on the next smaller credit card debt.

Yes, this will take some time. But, closing debt accounts is rather more motivating than having to pay on all of them. 

The only demerit of the snowball method is the amount of interest you have to pay which is somewhat higher than the Avalanche method.

The Avalanche method:

In the snowball method, you start with the smallest debt and pay it one by one. In the Avalanche method on how to pay off credit card debt, you list your credit card debts, interest rate wise, starting with the highest interest rate first and ending with the lowest one.

Suppose, You have three credit cards of $ 5,000/= limit each, But Credit card no. 1 has a 3% interest rate, credit card no.2 has a 5% interest rate, and the last one with a 7.5% interest rate. 

What you are supposed to do is to continue paying whatever minimum monthly figure and squeeze out some extra amount to pay off the debt with the highest interest rate (in our example, the credit card with the 7.5% interest rate).

This method again will take time for the result to be apparent. But it will help you pay off the loan with the highest interest rate that is a relief, and overall you will comparatively lesser interest amounts since the remaining debts bear lower interest rates.  

Some suggestions that will help you on how to pay off credit card debts fast:

1. Have an emergency fund. Save some money each month for emergencies and financial crises. 
2. Use cash where you can. Use currency is to avoid unnecessary usage of credit cards on which you have to pay interest.
3. Curtail your expenses.