Nearly every household in the U.S. has some amount of credit card debt. Depending on how much you have, this debt can actually be great for your credit score. However, if you’re missing payments or the debt is over what you can comfortably pay, it can end up hurting your credit in the long run.
Creating a payment strategy for credit card debt is essential to managing and eventually paying off debt. Read on to discover how you can best manage this debt by using payment strategies, debt relief, and refinance options.
Develop a Payment Strategy
The first thing you should do after signing up for a credit card is to develop a payment strategy. Through this strategy, you’ll develop goals for paying off your debt. Using a debt calculator can help you determine how long it will take you to pay off credit card debt, as well. Below are a few important strategies you can use when trying to pay off credit card debt.
Payment automation
Late fees are one of the biggest challenges when it comes to credit card payments. By setting up automatic payments, you can ensure that your debt gets paid regularly each month. Some companies even allow you to shift your monthly due date to suit your needs.
Maximum balance payoff
Lenders make a profit from credit card interest from each pay period. So, those minimum monthly payments you’re making take longer to pay off in the end. If you’re looking to make a serious dent in your debt, paying off the maximum amount of balance is essential.
Snowball vs. Avalanche
There are two essential ways to pay down debt – the snowball and avalanche methods. With the snowball method, start with your smaller debt payments first. After these are paid off, move to the larger payments until your debt is eliminated.
By using the avalanche method, you’ll start big and end small. So, focus on your higher interest rates before moving onto the smaller debt. Both of these methods are common when tackling credit card debt, so choose the one that works best for your needs.
Debt Relief Options
If you’re really struggling with your credit card debt, there are a few options you can try. These more serious steps of debt relief require more effort, but they do pay off.
First, try creating a debt management plan with the help of a credit counseling service or with your lender. During this process, they’ll help you renegotiate the terms of your original agreement or help consolidate your debt. Debt settlement options can also help break down your debt into more manageable payment options.
A debt consolidation refinance can also help you pay off your credit card balances sooner. This is typically done through a cash-out refinance method, allowing you to pay off higher interest credit card debt using the equity available in your home. You’ll still owe the same amount in debt, but a lower mortgage interest rate can help you lower your monthly payments, consolidate the debts into 1 payment, and help you pay these debts off faster.
For more information on refinance options for credit card debt, contact a mortgage professionals in Denver.
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