It is no secret that high-interest consumer debt is one of the biggest wealth killers out there. High-interest rates and frivolous spending will hurt your monthly budget and keep you from growing wealth. And what is the most common type of high-interest consumer debt? Credit cards.
While credit cards can be a fantastic tool to help you build your credit score and history, they can quickly become a huge expense and a significant drag on your net worth if you are not utilizing them correctly. So, what do you do if you already have credit card debt and want to pay it off? In this article, we will be discussing our top strategies to help you pay off your credit card debt.
Review Your Budget
The first step to getting out of credit card debt is reviewing your budget and checking your spending. This review is essential for two primary reasons:
Cut Back On Spending
You can not get out of credit card debt if you are still using your credit card. Find where you can cut back on your spending and start leaving your credit card at home. Look at your monthly budget and put some extra time into analyzing your spending.
Find Extra Money
The following purpose of reviewing your budget is to find extra money. If you are not already tracking your spending, you will be surprised to see where it is all going each month. Look at your subscriptions, recurring payments, variable bills, and everything else. Is there anything that you can cut back on? If there is any extra money, start applying it to your credit card.
Make More Money
Our next step to helping you get out of credit card debt is to increase your income. It does not matter how you increase your income (as long as it is legal!). Increasing your income may be by picking up a side hustle, asking for a raise at work, picking up a part-time job, or switching companies at your 9-5. Just make sure you apply that extra money to your credit card balance.
Take Out A Personal Loan
The last tip we have to help you get out of credit card debt is to take out a personal loan to help you pay off your credit card and potentially consolidate multiple credit cards. Does taking out more debt to pay off debt sound counterintuitive? Let us explain:
Per Wallet Hub, as of 2022, the US's average credit card interest rate is 18.32%. That is an extremely high-interest rate. Per Experian, the average interest rate on a personal loan in the US is 9.41%. So, on average, if you take out a personal loan and use the funds to pay off your credit card balance, you will pay less in interest over the life of the loan and potentially decrease your monthly payments while paying off your credit card faster.
Those are our tips to help you get out of credit card debt. If you follow these tips, you will be on your wealth-building journey in no time. Have any questions or want a one-on-one debt payoff plan? Check out our extensive list of financial coaches to get started today!