Credit card debt can feel overwhelming, but there are tools and resources available to get you back on the road to financial wellness. Consider these strategies for tackling credit card debt:
A balance transfer can be an effective way to tackle your credit card debt. In short, you transfer your revolving debt to a different credit card with a lower rate so you can get a handle on the climbing interest charges.
Not all balance transfer programs are created equally, so it’s important to understand the terms to ensure the program is right for you, and that it won’t actually end up costing you more in the long run. Consider the following terms:
- Promotional rates: Some cards will entice you with a 0% rate for a limited time. After the promotional period expires, your rate jumps to the normal offering, which could be similar or higher than what you already have. Read the fine print for tempting offers carefully — you could be on the hook to pay interest retroactively if you don’t fully pay off your transferred debt during the promotional period.
- Balance transfer fee: Some cards charge a fee to move your balance over, and fees based on a percentage of your total are the most common. For example, if you plan to move over $10,000 to a card with a 5% transfer fee, you’ll need to make room for that extra $500.
- New purchases: Typically the promotional rate will not apply to new purchases. You also can’t direct your payment to specifically go towards your transferred balances or the new purchases, which means you may still accrue interest.
SESLOC keeps balance transfers simple with no fine print. There’s no fee to bring your balance over, no penalty fees on late payments, and the fixed-rate is ultra low. That means there’s no surprises, and you have the flexibility to tackle your debt on your own terms.
Once you’ve consolidated your credit card with a balance transfer, the next step is to review your budget and make a SMART goal. A SMART goal provides a roadmap for success because it is specific, measurable, attainable, realistic, and time-based. Here’s an example: my goal is to pay off my $2,500 credit card debt in six months. I already budget $220 towards the monthly payment, but if I carefully meal plan each week I can save an additional $200 each month to put towards my debt. Need help starting your budget or setting up a goal? SESLOC Money Coaches or our partners at GreenPath Financial Wellness are here to help — free of charge.
Convert to a Personal Loan
An alternative strategy is to consolidate your credit card debt with a personal loan. The closed-end structure means your total debt and loan interest is divided into monthly payments over a fixed term, which you may find easier to budget for. A personal loan also has the flexibility to include other sources of debt, such as medical or other bills. Additionally, it might be worth exploring if you find yourself struggling to control your credit card spending — converting to a personal loan and closing your card might help you resist temptation. Apply now.
The Roll Down Method
The Roll Down Method, also known as the Avalanche Method, is a plan of attack for debt spread over multiple credit cards. Work it into your budget by including the minimum payments for all your cards, and then determine what you can pay towards debt repayment each month. Make the minimum payment on all cards, but add the extra debt repayment fund to the one with the highest interest rate. When that card is paid in full, roll over what you were putting towards it onto the card with the next highest rate until you pay that one off. Use the roll down credit card debt calculator to see how this method can save you money.