Debt Reduction — Beating Broke

How to Pay Down Your Credit Card Faster Even If You Don’t Have Extra Money

March 5, 2020 By MelissaB Leave a Comment

Your budget is tight. I get that. You stare at your long list of debts and don’t know where to begin. You may wonder how to pay down your credit card faster even if you don’t have extra money. After all, you may be doing all you can just to meet your basic monthly obligations.

If you search the Internet for help, you’ll likely find suggestions like eliminating eating out, visiting coffee shops, and buying designer clothes. But what if you’ve already eliminated all of those extras, plus cable television, date nights out, and entertainment with the family? What if you buy used clothes, have your grocery budget as low as it can be, and have changed to VOIP phone service? Perhaps you’ve cut as much as you can. What if you have nothing left to cut?

You may feel like you’re in a desperate position, but there are still strategies to pay down your credit card faster even if you don’t have extra money.

Stop Using the Credit Cards

Before you begin to employ any pay down strategies, the most important thing you can do is stop using the credit cards! There’s no way to pay down the balance if you keep using the card. Let’s be honest, if you stop using the card completely, eventually it WILL be paid off even if you don’t use any strategies to pay down your credit card faster, even if you don’t have extra money.

However, if you stop using the card and use the following techniques, you will slowly but surely pay off your credit card. And, you will do it faster than if you just stopped using the card and paid the minimum payment every month. (Sure, that’s better than using the card and having a perpetual balance, but just paying the minimum will take you sometimes 20+ years to pay off the card.) Instead, use a two fold approach: stop using the cards and use these strategies:

How to Pay Down Your Credit Card Faster Even If You Don’t Have Extra Money

Use these techniques to “create” extra money to put on your credit card, which will slowly but surely help you lower those balances.

Switch to a 0% APR Credit Card

If your credit is good enough, you may want to try applying for a 0% APR card. These cards often give you a 0% APR for 12 to 15 months. Since you’re not paying interest during that time, you can pay off your credit cards more quickly than if you were still paying interest.

If you owe $10,000 on a credit card, and you have an APR of 16.99%, each year, you’re paying approximately $1,699 in interest on the card or approximately $141 a month in interest. Now, imagine having a 0% APR for a year. That means if you make your exact same payment as before switching to a 0% APR credit card, you’re paying an additional $141 a month on the card instead of interest. By taking advantage of a 0% APR credit card, you can reduce your balance by an additional $1,699 in a year!

Many of these cards charge a 2 to 4% transfer fee, so do the math first and make sure you will save money over your current card charging interest. If the math works in your favor, consider continuing to use this strategy. When the 12-month promotional 0% APR ends, switch your remaining balance to another 0% APR card until you have the card paid off.

Negotiate a Lower Interest Rate

If you don’t have access to a 0% APR credit card, try to call your credit card company to negotiate a lower interest rate. I’ve had good luck with this strategy. Just recently, I called one of my credit card companies and asked for an interest rate drop. They moved me from 13.99% APR to 10.99% APR.

Let’s say again that you have a $10,000 balance. If you’re paying 13.99% APR as I was, then you’re paying approximately $1,399 a year in interest. Just this simple rate reduction to 10.99% APR means you’ll be paying approximately $1,099 in interest per year, saving you $300 a year in interest. That entire $300 can be used to reduce your overall balance, assuming you continue to make the same payment throughout the year. This difference in interest rate means you have more money you can apply to the balance without increasing your monthly payment.

Pay Weekly or Bi-monthly

Most people pay their credit card monthly. If you instead pay weekly or every two weeks, you’ll pay down your balance faster without increasing your payment.

Why? Two very important reasons.

First, your interest rate is computed based on your daily average, and if you pay more frequently, you’ll lower your daily average. If you normally pay $100 a month, just pay $25 a week instead or $50 every two weeks.

Second, if you pay weekly or biweekly, you’re actually paying more than if you pay monthly. If you pay $100 a month, you’re paying $1,200 over the course of a year. If, however, you instead pay $25 a week, you’re actually paying more–$1,300 a year. Sure, it’s only $100 more on principal over the course of a year, but in time, that additional principal payment will make a difference in how quickly you’re able to pay down the card.

Don’t Lower Your Payment as Your Minimum Payment Drops

If you’re currently paying your required minimum payment of, say, $100 a month, in a few months, that minimum payment will drop to, say, $97. Don’t drop your own payment. Keep paying the $100 you’re used to paying. That extra will be put on principle without affecting your current budget.

Final Thoughts

If you’re looking at your bills and desperately wondering how to pay down your credit cards faster even if you don’t have extra money, remember, there are strategies to help you pay off the cards faster. Just using these simple steps will help you pay more on principal without putting extra money on the debt. Of course, as you make additional money, you’ll want to put it on the debt, but until then, you can gain traction with these strategies.

What other tips do you have for people to pay off their credit cards faster even if they don’t have extra money to throw at the debt?

You Can’t Become Debt-Free Without Changing Your Mindset

February 28, 2020 By Justin Weinger 1 Comment

Some people have the skills early in life and understand the importance of saving money. While others live life for the moment without giving any thought to the future. Unfortunately, the majority of the workforce falls into the latter group. Without changing your ways, you won’t be able to ever successfully achieve stability when it comes to your finances and enjoy the fruits of your efforts. The good news is that it’s never too late to change your mindset and learn how to save money.

Borrowing Money

When you spend everything you make, you’ll need to borrow money often. This cycle of borrowing is costing you a prosperous financial future. Before long, you’ll owe money to family, friends and banks. Once your credit drops, your ability to borrow more money from a lender becomes nearly impossible. There are other lenders with less stringent guidelines for small amounts of money such as short-term installment loans.

Controlling Your Spending

The first step to becoming and remaining debt-free is to control your carefree spending. It’s easy to order lunch out and opt for take-out at home for dinner a couple of times a week. However, the money you’re spending is preventing you from having money in the bank for other things. Bringing your lunch and eating out just once or twice a month will help you reel in your spending and have money on hand for things you really need.

Misuse of Credit

Credit is a wonderful thing if you use it correctly. However, you should always think long and hard about any purchase, especially before placing it on a credit card. For example, some people have cards that offer rewards for use. They use them to buy airline tickets, pay for hotel rooms, buy dinner at restaurants and pay for groceries at the supermarket. However, when the bill comes in, they pay it in full and avoid paying interest while still achieving the rewards. If you use credit cards correctly, you can benefit. However, many people get credit and misuse it. They view it as extra money and begin to think of ways to spend it. Soon, the credit card is maxed out, and the bill comes in. Now you have more debt with interest accruing.

Live Within Your Means

You have a decent job but you still struggle to make ends meet at the end of each month. This is an unpleasant fact for many families across the US. You own a home at the top of your price range, have two cars with payments and several credit cards with hefty balances. Living within your means is the only way to live life comfortably. When you start out life with piles of debt, you’re setting yourself up for financial ruin. Unfortunately, banks are similar to fairweather friends, when your credit score is good, they want you, but fall from grace and you’re no longer welcome.

Crafting a Budget

If you’re ready to change your spending habits and live within your means, you’ll face a bright financial future. Luckily, there are many budget apps online for free. Select the one that best fits your current collected debt. A budget is more than simply a sheet of paper with a bunch of numbers. It gives you a clear accounting of your financial status. You get to see not only the amount of your debt but also from where it derives. This is important. Sometimes seeing how much money you waste can be a real eye-opener.

If you want to become debt-free, it takes a commitment to change your spending habits and how you view money. With a different mindset, you can move forward and learn the importance of saving today to fund tomorrow.

More Reasons to Beat That Debt

January 27, 2020 By MelissaB Leave a Comment

If you’re in debt, you’re not alone. A few generations ago, most Americans did not carry debt, and if they did, they only had mortgage debt. Carrying debt was looked down up and considered shameful. But how things have changed now. Many 18-year olds immediately go into student loan debt for college, and then for credit card and automobile loan debt and to top it all off, mortgage loan debt.

Once you’re in debt, you can feel like you’re in so deep, there’s no way out. But don’t give up! There are many more reasons to beat that debt than to not.

More Reasons to Beat That Debt

When you’re deep in debt, you may feel there’s no point in going on a strict budget and putting extra money on your debt. After all, you work hard to scrimp and put extra money on the debt, but you barely see a difference in the balances. Sure, progress is slow in the beginning, but there are so many benefits of working hard to pay off your debt.

Today’s Money Is Yours for Today

One of the most frustrating things about being in debt is that you pay for yesterday with today’s money. Let’s say you earn $3,000 a month, and $1,000 of that money must go to payments for your debt. That is 1/3 of your income that must go for past expenses that you went into debt for. Imagine if all the debt was paid off and you had that $1,000 to use today. What would you do with an extra $1,000 every month?

Money to Save for Long Term Goals

Maybe part of that $1,000 can be saved for long-term goals like a fabulous vacation you can pay cash for, or to grow your retirement nest egg, or to save in your children’s college fun. When you don’t have to pay debt payments, you have more money to save for, and advance, your future.

More Reasons to Beat that Debt — Photo by Shoeib Abolhassani on Unsplash

Security

Probably the best reward for working hard to pay down debt is that you have financial security. If your car is paid off, you don’t need to worry that it will be repossessed if you lose your job. That car is yours no matter what.

Money for Charitable Goals

If giving to charity is important to you, you can give more freely when your money isn’t tied up in expensive debt repayment. You can give to your church, or an organization that you support, or a family in need. You have the means and the ability to give generously when there is no debt burdening you.

Financial Freedom

When you are in debt, you feel burdened, even if you don’t realize that you feel that way. There is something about being out of debt, not being beholden to anyone, that makes you feel free and empowered. You don’t realize how much having debt was subconsciously weighing you down until the debt is gone. I’ve experienced this myself and also heard many people share that this is what they felt, too.

Final Thoughts

If you’re in debt, remember, getting out of debt, especially significant debt, is a marathon, not a sprint. However, you should get out of debt as fast as you are able to benefit from these many more reasons to beat that debt. You’ll be glad you break the chains when you get out of debt.