Americans have nearly $1 trillion in collective credit card debt in 2021, and the figure is growing consistently with every passing year.
The average American household has $6270 in credit card debt, with nearly half of the US population currently in debt.
Those are some scary facts and figures that clearly show that debt is a major issue this country is facing right now.
People don’t know how to pay off these mammoth amounts of credit card debt that they have accumulated over the years without even realizing it.
One of the biggest reasons why so many people are struggling and have got themselves under unmanageable debt in the first place is lack of financial education and awareness.
They never teach this in schools, perhaps intentionally, and neither do parents bother to teach their children how to manage money and debt efficiently.
So instead of being a tool to help you when you need it the most, which debt was supposed to be, it has become a source of hardship and difficulty for many.
Today, we’re asking a credit card expert, Beverly Harzog, how to pay off credit card debt fast. Beverly is not just a bookish expert but someone who has been there and done that.
She was once in a credit card debt of more than $20000 and maxed out seven credit cards. But with her knowledge, she was able to get out of it very quickly in just two years.
Now, she uses credit cards as a tool for her as opposed to letting the credit card companies use her as a tool for their profits.
How to Pay Off Credit Card Debt Fast
First of all, credit, as a subject, is not intuitive. You can’t just wake up in the morning knowing how to handle your credit cards or how to get a good credit score.
You can be a smart person and still be bad at personal finance, and it’s fine because Beverly was a CPA but still got herself into terrible debt.
Managing credit is a skill, and you can learn it like any other skill. You just need to start studying personal finance and credit to be good at it.
But if you’re already in a debt that you wanna pay off fast, learning credit management seems like a long-term solution to a short-term problem.
In such a case, Beverly has some ways how you can pay off your credit card debt fast. Let’s discuss them now.
Downsize As Much As You Can
To pay off debt fast, you need to save more money so that you can throw it at your debt and start paying off the principal.
Now, like popular belief, you don’t need to make a lot of sacrifices to save money. The easiest way to start saving more is by downsizing things that are not necessary or important to you.
Start with keeping a track of where your money is going and the things you’re spending on. Then, rate those things on a scale of necessity/need, important but not a necessity, not that important, and why the hell do I spend money on this.
Once you know what you’re spending on, look where you can cut expenses completely and where you can downsize and save money.
Going to an expensive gym? Maybe you can try a cheap, local gym instead. Driving a high-end car, why not switch to a low-cost one. Eating a lot outside, try having some homemade food. It’ll also benefit your health.
Try downsizing most of the things that fall under the “important but not a necessity” and “not that important” brackets.
Also, absolutely stop spending on things that you know you’ll regret later. For example, impulse shopping and expensive night-outs.
Budget and Let Everyone Know
It’s kind of an extension to the previous point. After downsizing, you now will have a significant amount of money left.
Budgeting is all about deciding how you will use that money and how much of it will go towards those debt repayments.
Without a budget and proper guidelines as to how that money will be used, there’s a high chance of you going back to old habits.
Another crucial thing to do is let everyone in your family and friend circle know that you’re on a budget and you can’t overspend.
It is so crucial because many times we get off-track because of the constant peer pressure from our family and friends.
Make sure you are around supportive people because their support will play a major role in your success.
Methods of Paying Off Debt
There are two methods you can use to start paying off your credit card debt in a structured manner: Debt Avalaunce and Debt Snowball.
In the debt snowball method, you start off by paying the smallest balance on a credit card and work your way up to the largest.
You end up paying more money this way because it takes a longer time and interest counts for that period, but you constantly get that quick lift because you just paid something off.
If you wanna save more interest by paying off as quickly as possible, then there’s the debt avalanche method where you start off by paying the highest APR first and then go down. The debt avalanche method is harder, but it saves you more money.
Now, you don’t need to strictly follow any of these methods. You can combine the two by starting with one method and then switching to another whenever you want.
There is no one correct method that’s superior to others. It is really subjective. The method that worked for Beverly might not work for you and vice versa.
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How to Pay Off Medical Debt
To make any of the above methods work, you need a constant revenue stream that helps you stay afloat and also make the repayments.
But what about those who are in medical debt and, to add to the trouble, can’t work because of their medical condition?
The reason why it is an important issue is that medical debt is one of the top reasons for bankruptcy in this country, and many people struggle badly because of their inability to work.
What Beverly recommends in such cases is simply calling your medical providers to talk about your bill. Explain to them your situation that you’re trying but can’t work because of the symptoms, and they might be able to do something.
The same can be done with your credit card provider as well. In fact, credit card companies have dedicated hardship departments.
So say, if you have a situation where you’re out of work for a year and then you will be able to work again, you can talk about it with your card issuer, and they’ll probably make a plan for you to skip a few payments or might let you pay half of the minimum payment just to stay current.
If you feel like you’re really drowning and the situation is getting out of hand, then go to the National Foundation for Credit Counselling and get on the phone with a counselor.
They’ll talk to you for free for an hour and give you some advice. Then, you can decide what would be the best path for you.
Credit Card Forgiveness
Many people talk about credit card forgiveness, but it’s a pretty complicated and vast topic that can do more harm than good.
There are certain requirements you need to fulfill and certain tests you need to pass to qualify for credit forgiveness.
It is not a topic to discuss in this blog. But if you really want to explore this as an option, then discuss it with your counselor. Only after knowing your specific case, they’ll be able to recommend something.