Eco-Plant Based Living

Health + fitness

Wealth Creation

Recommended products

Top

How to Pay off Credit Card Debt – Step – by – Step Plan

There are several plans on the Internet or even with various financial consultants about how to pay off credit card debt (step – by – step – plan). Unfortunately, more often than not none of the methods will work unless you have a concrete plan that you have listed down yourself. 

You need to take the reigns of your financial debts within your own grasp and make a well-structured plan for yourself. 

How To Pay Off Credit Card Debt (Step – by – Step – Plan)

The best method to follow when wondering how to pay off credit debt is by using the debt snowball method. This particular method helps you list down the debt from smallest to largest and then pay it off one by one. 

1. List Down All Your Credit Card Debts (In Ascending Order) 

This step will help you actually have a better understanding of your debts and credit card financing situation. 

In fact, listing down your debts will make it clear whether you have a spending problem or you have debts that you genuinely need to bear. 

Hence, if you find that most of the debts or even some of them are ones you do not need, it’s time to make a behavioral change. The snowball method is credited with helping individuals make significant changes in their spending pattern. 

2. List Down Your Monthly Budget For Repayment 

Once you have the list of your credit cards in hand, you need to know how much of your monthly income can you spend in repaying your credit card debts. 

In this case, the best way is to list down all expenses and your income. Following this, figure out how much you can spend on your debt repayment. 

3. List The Minimum Payment For Each Debt 

Now that you know how much of your income you can spare each month, it’s time to know the minimum payment that you need to make for each month. 

This is very important. If you are unsure about the minimum payment then we suggest your use an authentic paying off debt calculator. You will find a number of them on bank websites. 

The best one to use is the debt repayment calculator of the financial institution that issued the credit card. 

4. Pay Minimum On All Cards Except The Smallest 

Now that you know the minimum balance of each card, it’s time to start repaying your debts. 

This is the part where almost everyone gets confused. Here we explain how to pay off credit card debt with the snowball method in the most simplest way. 

So, the idea here is to pay the minimum balance for each of the credit card debts but not the smallest card. This doesn’t mean you don’t pay the smallest card at all. 

In fact, whatever budget you have left after paying the minimum balance for all cards, you use it towards paying the balance of your smallest card. This way while you are reducing debt on all cards, you will be able to close the card with the smallest amount at an increased pace. 

You May Also Like To Know 15 Spending Habits to Break in Order to Begin Saving Money

5. Close Account With Zero Debt And Move To The Next Lowest Debt 

Once your first smallest debt reaches zero balance, it’s absolutely essential you close that account and cancel that card. You do not need to give yourself the chance to make another purchase while still paying off debts. 

In fact, we suggest even before you start paying off debts, you discard the credit cards. Every individual who has dealt with the nightmare of debts knows how dangerous it is to keep a zero debt credit card lying around. 

While some might say that credit cards help you earn miles and other beneficial points, do not let that stop you from closing your account. You can think about the miles and points once you’ve paid off all your debt. 

6. Accumulating The Balance For The Next Lowest Balance 

This is where you have to understand why the debt snowball method is actually the answer for how to pay off debt fast. 

Once you have closed the first small account, you now can channel more repayment towards the second small account. Here is a small example to explain it better. 

Let’s assume you have three debts of $700, $1000, and $1,500. The minimum payment for the $1,000 debt is $100 while that of $1,500 is $150. 

On the other hand your budget for repayment per month is $400. Therefore, this means that you spent $150 per month to repay the debt of $700 $[400 – (100 + 150)]. 

Now, once you have finished paying the $700 debt, you have the $150 balance you were using to pay off the debt at your expense. 

Therefore, now when you pay off the remaining two debts, you first pay $150 for the $1,500 debt. Then you pay the remaining balance of your repayment budget towards the $1,000 debt i.e., $250. 

7. Keep Repeating The Process Until You Pay Off The Last Debt 

Now that you know how to pay off credit card debt (step – by – step plan), all you have to do is keep repeating this process until you’ve successfully paid off all the debts. 

The advantage of this method is that it builds momentum and you have evidence of reducing debt. This helps with keeping up morale and doesn’t sway you away from sticking to your repayment commitment. 

Finally, there is one thing you must know about the repayment method. You need to make sure you account for the interests that each of your debts hold. If you calculate without taking that into account, it won’t be an easy repayment journey. 

On the other hand, if your goal is to reduce interest or save on charges, then the debt repayment method suitable is the debt avalanche method. 

Debt Avalanche Method 

In this case the steps are rather the same, however, here you begin repaying from the debt with the highest interest rate and work your way down to the smallest. 

Unfortunately, the disadvantage of this method is that if the highest interest debt has a large balance, it’ll take you a longer while to return it then usual. This might become demoralising for most. 

The above two methods are two of the most suggested plans for anyone inquiring about how to pay off credit card debt (step – by – step plan). 

You can get in touch with us and follow us on Instagram for any questions about being a FULL TIME FAMILY! We are always online and look forward to hearing from you.

post a comment