ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

A Simple Way to Pay Off Credit Card Debt

Updated on September 11, 2014

Why do we use credit cards?

Credit cards have some advantages. If you’re a financially organized person with enough savings or ready cash to handle emergencies as they arise, you can take advantage of cards that offer cash back rewards and airline miles by paying your card off every month and reaping the reward benefits. For major purchases at a big box store, you can often open a store credit account at 0% interest for a set amount of time to get a certain percentage off your purchase. If you pay that card off in the allotted time, you can save a lot of money on your large purchase. Credit cards also offer a higher degree of fraud protection than debit cards. If you’re travelling and your cash, checks, or debit cards are stolen, you stand to lose more financially than with a credit card, where you can usually quickly dispute charges. They’re also very useful in situation where you’ll need to make a deposit and don’t want to tie up your operating money, such as for car or equipment rental. Regularly using and paying off a credit card can help build your credit history.

Where the problem starts.

The problem starts when you are unable to pay your card off regularly without incurring interest or charges. Sometimes this is inevitable. You may need to make a major home repair immediately, with no time to go through a bank loan process. You may be waiting on a financial aid check for school and need to pay for your classes before that check is going to arrive. You may lose your job or suffer some other loss of income that makes it impossible to pay the card off every month, while also necessitating that you use it more than you’d like. You may just to learn more responsibility about handling finances. Whatever the reason, it can be difficult to pay down credit card debt, not only because of the high interest rates, but also because the interest that accrues on your card is applied to the principal balance, every month. This means that if you’re not making payments, every month your interest increases as your principal balance increases.

An easy way to pay down your credit card debt.

A simple way to pay down your credit card and other loan debt is to make a chart showing your balances and the interest rates. You will then use this chart to calculate what you should pay that month.

Sample Chart

Your debt chart.

Multiply the total balance of your debt by the APR and the amount you get will be the amount you should pay that month. To pay the debt off quickly, continue paying that same amount until the debt is gone. If that is too much of a financial burden, or you have multiple debts, you can repeat this procedure every month. You’ll notice that as the balances are paid down, every month you will pay less and less.

You can apply this procedure to the debt with the highest interest rate while paying what you can on the other cards. If you recalculate the payment every month on your high balance card, as that payment amount reduces, you can then apply that “extra” money to your other debts.

It’s best to pay off the debt with the highest interest rate, but if you have many smaller balance debts, you may prefer to pay what you can on the big debt, and first pay off your many smaller debts, to free up that money to apply to larger payments later.

In the example given in the picture, the person in debt would need to have an extra $1,355.00 to apply to their debts beyond their living expenses to use this method on every debt at once. This seems unlikely. The person may be best suited by working on paying off that store credit and loan first, and then applying those funds to the credit card and Home Equity Line later.

Your debt profile

What is your biggest debt (excluding mortgage)?

See results

Important!

This really works best when you’re doing your best not to add to your debt. If you’re still charging above your means, you’re not going to see the amounts come down very quickly.

You must continue to make at least the minimum monthly payments on your debts while you’re attempting to pay everything down, to avoid collection.

Other tips

On the occasions where you are past due, and your account is going to go to collections (or possibly is already in collections), many creditors will settle for a large lump sum payment that is less than the full balance. If you are able to get a lower interest rate loan to settle a higher interest rate debt for less, that is one way to save a little money in addition to paying a debt off more quickly. This frequently works with medical bills.

If you are in a position where you can’t pay your bills, do not ignore them and hope your creditors won’t find you. Call your banks and see if they are able to defer or forebear a loan. Student loans will frequently offer this service, and even mortgage companies may be able to modify a loan so that your payments are smaller.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)