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4 Ways to Pay Down Debt

4 Ways to Pay Down Debt

Wise Spend Wednesday touches on a bit of debt management this week. If you've managed to not "spend wisely," and racked up some credit card debt, CreditSoup is here to help you manage that.

I'm sure you're probably overwhelmed by now and wondering "where do I even start?" to get rid of your credit card debt. Fortunately, below are four ways to begin paying it off.

4 Ways to Pay Down Debt

  1. Bring current anything that is "past due." This is the most important way to begin eliminating credit card debt. Credit card companies are usually the first to report a missed payment to the credit bureau, so you will want to take care of these items first and foremost. Try your best at bringing the account current by paying the past due amounts first, as well as the next month's minimum payment. Going forward, if you make at least the minimum payment, this will show the bank that you, the consumer, are acting in good faith at repaying the outstanding debt. If the missed payment is well over 30 days, you will need to call the credit card company and talk to them about cleaning up your reported delinquencies.

  2. Pay more than the minimum payment. If you are able, this is the quickest way to pay down any debt. Take for instance if your minimum payment on your card is $35/mo. Paying $40, $50, or more that month will pay that bill off quicker, and even give you leverage for a credit line increase. If you have several months worth of "above minimum payments," and then you request a credit increase on your card, you will be more apt to get it. Thus, increases your borrowing power and your credit score will then increase as well.

  3. Pay off the smallest bill. Once you've taken care of the past due accounts, do a quick audit of all of your credit card bills. Start with the one that has the least amount charged to it. If it's under $100, try and pay that off first. Once it's paid off, stash the card away so you're not tempted to charge to it again. You don't have to cancel it, just don't use it for a while. Keeping the store card paid off, but active will help increase your credit history and show the banks that you have a higher borrowing power. Opt to use it on small things once every 3 to 6 months to keep it active. If it happens to be a store charge card, and you're signed up for special offer emails, it's probably best to unsubscribe from them for a while. This way you will not be tempted to charge anything.

  4. Consider Debt Consolidation. If you simply have just WAY too many cards with large balances on them, or even outstanding loans for that matter, consider either a low interest bank loan, or a balance transfer credit card. This way is probably the best route to go. You will be able to make ONE payment versus several with varying interest rates in which you'll end up paying more than you owe. With a bank loan, use that money to pay off all the cards for a much lower interest rate than a credit card. However, a balance transfer card works in a similar way as a bank loan. The issuing bank will pay off the other cards by transferring that debt to ONE card. Many of the balance transfer cards will come with a "no interest" or very low annual percentage rate (APR) rate for the first few months, or sometimes even a year. Having ONE payment to manage a month, is far better than several.

Be Worry-free

Don't fret about massive debt. There are several ways to relieve some of it, and in some circumstances, improve your credit score while you're at it! Whether it be a bank loan, or a balance transfer card, breath a sigh of relief knowing that there are solutions out there to help you with your credit. And CreditSoup.com has some great offers that are fine tuned to your specific needs.

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