If you have one credit card, chances are you may have multiple. Different credit cards offer different perks: enticing rewards, lower debt utilization, and more than one way to buy things now and pay for them later. The key with having a credit card, or borrowing any sort of money, is to pay off your bills on time, in full if possible. If you are late on paying one, or many, credit card bills, it can seem tough to dig yourself out of the hole. If you do find yourself in this situation, we’ve analyzed some strategies that may help you.
Step 1: Stop using your credit cards altogether, or use them much less
If you’re in credit card debt, the first thing you can do to prevent adding more debt is to stop using your credit cards. Use a debit card, which uses money you already have in your checking account, or use cash whenever possible. That way, your credit card bills won’t grow, and you can work on paying off the debt you already have.
Step 2: Set up bill autopay
If your problem is not the amount of the bill, but sticking to the due date, then you can consider setting up autopay on your credit card bills. This way, every month, on a date you specify within the due date window, money will automatically be taken out of the account of your choosing to pay off your balance. The caveat here is that you need to make sure that each month, you have enough money in your account to cover your bill. Otherwise, you’ll be slapped with another fee to pay -- an overdraft fee.
Step 3: Negotiate a lower interest rate
If you’re not paying the minimum or full balance of your credit card bill, you are also paying interest each month. This makes it much harder to pay down the total amount you owe. If you are able to stop using a credit card day-to-day, you can contact your creditor and request a lower interest rate in order to continue paying off your balance.
Step 4: Pay more than the minimum required
If you’re able to pay off some of your credit card bills, do that! Bonus points if you can pay off more than the minimum balance due. This will slowly chisel down your debt total and avoid unnecessary interest accumulating. Use one of these two methods: the snowball method or the avalanche method.
Option A: Snowball method
Pay the minimum balance due on all of your cards, then start paying off the rest of the balance for the card with the smallest total debt accrued. Once you pay off all the balance on one card, use the money you were using to pay off the balance for the next smallest credit card debt. Continue this strategy until your biggest credit card bill is paid in full.
Option B: Avalanche method
Follow the same steps as the snowball method, but pay off your credit card with the biggest balance first. Then make your way down to pay off the card with the smallest balance.
Step 5: Get a personal loan
If you’re out of money and can’t pay back your bills, a personal loan may be your best option. You’ll get a loan that will help you pay back your bills over a longer time period. If you qualify for a low interest loan, you’ll eventually be paying back less over time than you would by paying off your bills one-by-one with your pre-established interest rate. Installment payments are typically fixed and predictable, which could also make budgeting your monthly payment a bit easier. Do your research on banks, though, because some may charge origination or late fees -- and no one likes fees.
Step 6: Consolidate your debt with a balance transfer card
This is an option you should only pursue if your debt is extreme and you are having a very tough time paying it off. We say this because consolidating your debt with a new card will most likely negatively impact your credit score, which is already hurting from your unpaid credit card bills. If you choose to go this route, do your research to find a card that offers 0% APR (annual percentage rate) on balance transfers and offers a low balance transfer fee. Try your best to pay off your debt within the 0% APR time window. Avoid using this card for purchases. Save it for paying down your debt only. This strategy could help you lower your overall monthly interest rate.