The average amount of credit card debt increased 2.4% in 2018 from 2017. The average American carries a balance of $6,506 in credit card debt. Thinking of paying off your credit cards, but not sure where to start?
Follow our basic guidelines to know what you should and shouldn’t do when repairing your credit.
Don’t: Expect to See Immediate Changes
You may not begin to see changes to your credit score when you begin paying down the balance. It could take at least one month for your account to update. Once your account updates, your credit score will begin to reflect the positive changes you’re making. Have patience during this process and don’t get discouraged when your credit score doesn’t increase by 50 points overnight. Remain consistent with paying down your credit card debts and you will see changes month over month.
Do: Take Steps Towards Fixing Credit
If you find yourself struggling to pay the minimum payment on your credit cards, take the time to track your expenses over a month. Are you spending extra money eating out? Do you find yourself online shopping when you’re bored? Tracking your expenses will give you a better idea of what you can cut back on to begin paying more than your minimum payment.
If your budget is tight and you aren’t able to pay more than the minimum monthly payment, earn extra income. Whether it’s a second job, or taking surveys online in your spare time. All money earned from your second job, can go directly into your plan to pay off your debt. What’s even better, is that you'll end up paying off your debt faster than you would by only paying the minimum, helping you to avoid the minimum payment trap.
Take a look at negotiating a better price for your cable services, as well. Do you need DVR boxes in each room? How about that premium channel where you barely watch the programs? Cutting back on these expenses will allow you to add extra dollars to your credit card debt.
Don’t: Continue Using Credit Cards
It should go without saying, but you should refrain from charging anything to your card as you’re working to pay it off. Use cash or your debit card for purchases during this period. Resist the urge to charge it to your card by leaving it at home, so it’s not easily accessible in your wallet. Sticking to this will help you pay down your balances without being on a debt rollercoaster.
Do: Have a Goal In Place
Best practice when setting goals is to have a clear idea of what goal you want to achieve, like paying off credit card debt and how you will get to the finish line. Setting specific, measurable, attainable, relevant and timely (SMART) goals will help you stay on track. Write your goals down so you’ll have a visual reminder of your progress. Once you’ve reached your goal, reward yourself with something simple, but gratifying.
Don’t: Expect Quick Fixes
Any credible credit solutions company will explain that there are no quick fixes to improving your credit score. Be cautious of companies claiming they can boost your score by 100 points in a month or two. If it sounds too good to be true, it is. Instead of looking for a quick fix, stick to your debt management plan and keep track of your goals so you can see the progress you’re making. Depending on the amount of credit card debt you have, it could take several months or even years to pay it off, but the satisfaction of knowing you’re debt-free will be well worth the wait. Don’t fall for the tricks of some companies, this is a slow and steady race!
Do: Ask for Help
Credit card companies might be willing to help you pay down your credit card debt. They can offer lower interest rates or short-term repayment plans - just ask! It doesn’t hurt to reach out and see what options they can offer to assist you in paying off the credit card debt.
If your credit card companies aren’t willing to help at that time, speaking with a credit counseling company, like our partners at GreenPath Financial Wellness can help you develop a budget and plan to pay off your credit card debt. This could include a debt consolidation plan to help save money on high interest rates if you carry multiple credit card balances.
Once you’ve paid off credit card debt, it’s important to stay out of debt. Don’t fall back into old habits, especially when you're determined to remain debt-free. Consider these guidelines moving forward so you can continue to be in a positive financial position.
© Genisys Credit Union and www.genisyscu.org, 2019. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Genisys Credit Union and www.genisyscu.org with appropriate and specific direction to the original content.