Did anyone else notice this past holiday season that more and more retailers were pushing their store credit cards more than their actual products? I went into a department store to buy a winter coat, and I was HOUNDED to sign up for their credit card. She made me feel like an idiot for not signing up with all the savings it was supposedly going to give me! Except she wasn’t the only one. Now, some retailers are able to open a store credit card for you while you’re in the dressing room! Why such a push? Because they know that most people don’t pay off their credit card balance at the end of each month. And before you know it, not only are you paying for your cute sweater, but now they have you paying super high interest rates that could’ve bought you two cute sweaters!

It’s no wonder then that America’s total credit card debt is creeping close to $1 trillion dollars. Carrying debt is not only the cause for huge stress (not to mention the dread of receiving the monthly bills revealing how much we owe), psychologically it also causes us to feel ashamed, depressed, overwhelmed, embarrassed, plus a long list of other feelings. So how do we tackle our mountain of debt, and keep our morale? Here’s five things you can do:

1.Don’t skip payments. Always, always, pay at least the minimum monthly payment. It may feel like you’re hardly putting a dent into your debt, but trust us when we say it’s far better to put SOMETHING down than face penalties, late charges, or a reduced credit score.

2.Pay every two weeks. This means you’ll make about 26 payments each year. Or anytime you receive extra cash from say Aunty Cathy, put it towards paying off your debt. But where to get the cash without mooching off Aunty Cathy? Look at your receipts to see if there are any nonessential purchases or money wasters that you can eliminate. If you’re ordering takeout or getting an extra side of fries at a restaurant, you may need to temporarily cut those things out. You’ll enjoy your caramel macchiato or side of guac much better without “debt-stress”.

3.Pay off the credit card with the highest interest rate FIRST. Put the “rewards points” aside for a moment here. Credit card companies may seem to want to help you out with perks, air miles, and extra points for certain purchases. But let’s wrap our heads around this: You give the bank your precious money for them to use in a savings account, and MAYBE they give you 1.5% back. They then give you back your money to use to pay off a credit card, which can charge you up to 24% interest! That can mean hundreds of dollars gone, people!A great way to help you see how soon you can pay off your highest interest-incurring credit card, is by using a debt calculator. The two we recommend are Avalanche and Snowball.

With Avalanche, the goal is not just to pay the interest off, but, more importantly, reduce the principal owing. A zero principal balance means no interest to pay. Once you’ve paid off the credit card with the highest rate, you can then tackle the next credit card with the next highest interest rate (and so on). Snowball reverses the order of what you pay off first. This calculator organizes and creates a plan to pay off debt by the smallest amount FIRST, until you get to the credit card with the highest balance. Although you will be paying more in the long run, if Snowball seems more realistic and less overwhelming, at least it’s some plan of action!

 

We also provide these debt calculators in our app and here on our website because they are honestly the simplest ways to organize debt, and create an action plan. In essence, they make it seem less intimidating to pay off your credit cards, without needing an accounting degree.

4.Ask for a lower interest rate on your credit card. It’s time to speak up! It is now possible to lower your current interest rates by simply asking your credit card company. It may seem intimidating, but what is the worst that can happen? It’s the least they can do for you (they’re taking your money by what feels like by the barrel!). If they don’t consent to a lower fee, there are other credit card companies  that offer lower or no interest rates for a period of time. You can transfer your existing credit card balance to a new credit card, and not owe any interest until the 0% APR period ends! Woohoo!

5. Consolidate Debt. Consider getting a personal loan (or line of credit) that has a permanent or temporary fixed interest rate. This reduces stress of juggling multiple loans, and has a fixed payment amount each month. The big advantage here is you get a lower interest rate than your current credit card interest rate, which will help you pay your debt faster. You literally will save thousands of dollars by consolidating debt!

If you have credit card debt, it’s ok! We’ve all been there. No one wants to get stuck in the deep hole of debt, either. You worked hard for your money, don’t let credit cards steal it!

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