Let’s say you charge $2,000 and the interest on your credit card is 12%. If you only make the minimum payment, it will take you approximately 16 years (yes, years) to pay it off. Getting rid of credit card debt not only increases your credit score, it’s a big relief to eliminate a payment, giving you extra money to spend or save. Here are 3 strategies to help you:
1. Pick just one credit card to pay off first – If you have several credit cards, consider throwing as much money as you can to pay off one of them. There are two options to consider:
- Credit Card with the lowest balance – Choosing this option will help boost your credit score because credit bureaus determine scores by the number of outstanding credit cards and the ratio of balances owed to your maximum loan limit.
- Credit Card with the highest interest rate – Choosing this option will save you money in the long term. Review how much interest you have paid over the last 12 months compared to your other credit cards and see if this option makes more sense to you.
2. Call your credit card company – Sometimes a simple phone call is all it takes to get a lower interest rate. If you are a long-term customer with a good credit score (in the 700 range), and have made your payments on time, you can usually get a couple of percentage points knocked off the rate. If you’ve gotten an offer of a lower rate from a competitor, mention that to the customer-service rep and there’s a chance they will match their offer.
3. Consider Transferring Your Balances – You can save hundreds of dollars by transferring credit card balances from a higher interest rate to a lower one—you can save a lot of money that way. However, it might just be a low, introductory rate that will only last for 12 to 18 months. Be cautious: Transfer your balance only if you are committed to paying off that credit card within the “low-rate window”; otherwise you may find yourself paying a higher rate than the one you paid on your old credit card.