Credit Card Debt

4 Cost Effective Ways to Pay Down Credit Card Debt

Paying down credit card debt can seem like a never-ending struggle.  As bankruptcy attorneys, we see credit card debt as one of the most common problems facing those with serious financial challenges.  It is not surprising with the high interest rates, unreasonable fees and penalties, and never-ending minimum payments that do not seem to make a dent in the total balance.

According to data from the New York Federal Reserve, the total national credit card debt being carried has hit $14.3 trillion, which represents a 1.1 percent increase from the previous quarter. One of the biggest problems’ consumers face when it comes to credit card debt is paying down a large balance or balances once they are incurred. However, certain tactics have been proven to be successful when it comes to paying off credit card debt.

Consolidate All Credit Card Debt Through a Personal Loan

One way to pay down credit card debt involves consolidating all debts and paying them off through a personal loan. While this method may seem counterintuitive in that it involves taking on another debt to pay off the first debt, many consumers find that paying one balance only on the personal loan is more manageable than making multiple minimum payments on several different credit cards. Additionally, personal loans tend to have much lower interest rates than credit cards which makes paying down the balance easier for the consumer.  However, to qualify for the personal loan, the consumer will need to meet the lender’s requirements, meaning that the consumer’s credit history will be checked.

Balance Transfer

Other consumers have utilized a balance transfer card to pay off outstanding credit card debt. What this process involves is taking previous balances and transferring them to one credit card so that only one debt is owed, meaning only one monthly payment needs to be made. Normally these cards offer a zero percent APR introductory interest rate, which gives the consumer a set period to pay down the debt without incurring additional interest on the debt. However, if the person does not pay down the debt in time before the introductory period expires, the cardholder will begin incurring new interest charges at the regular rate, which defeats the purpose of utilizing a balance transfer.

Paying the Debt Via the Snowball or Debt Avalanche Method

This next method many consumers have success with in paying down credit card debt is referred to as the “snowball method.” It requires hard work and discipline, but if done properly, it can be effective. Through the snowball method, the consumer reviews all the credit cards he or she has with outstanding balances, taking the one with the smallest balance first. All extra funds are then focused on that one balance while the person pays the minimum payment regularly on all other cards. Once the first credit card is paid in full, the money that was going towards that card is then paid on the next card and so on until all cards are paid off completely. This method may take some time, but it does not involve incurring new debt or transferring the debt to a new card to pay down.

Alternatively, the avalanche method is another successful one for paying down credit card debt. Unlike the snowball method, which takes the card with the smallest balance first, the avalanche method takes the debt with the highest interest rate first. However, the process is similar to the snowball method where all extra funds are focused on the one card with the highest interest rate every month. Once the first card is paid in full, the consumer then chooses the next card with the second highest interest rate, continuing until all cards are paid in full.

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

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