How to Pay Off Credit Cards

There are a number of simple steps that will allow you to take on the issue of how to pay-off your credit cards and get back in the black so you can once again become financially stable.

First, you must pay more than the minimum required payment every month. By only paying the minimum, you are doing exactly what your credit card company is hoping you’d do, because this is the only way they make money. The longer you take to repay off the credit card, the more interest they make. You need to pay as much as possible every month. If it takes skipping a lunch out or not buying that mocha latte, then do so. Making a few temporary sacrifices will dramatically save you hundreds.

If you have one credit card with a lower interest rate and you haven’t maxed it out yet, transfer all your other credit card debt to that card. If it is maxed out, make the higher payment on that card and once you have reduce the maximum limit, then transfer as much as you can from the higher interest credit cards; keep doing this until all your credit cards with a higher interest rate have a zero balance, then either negotiate for a lower interest rate on those cards, or cancel them. Also, take advantage of promotional lower interest rate credit card offers and transfers, if the maximum limit allows all the debt you have, then transfer them over to the new lower interest rate. Keep in mind that the new lower credit card rate is only a promotional rate, usually they are good for one year, then the rate will raise to possibly a higher rate than what you have now. So, you must pay off the promotional credit card within the year. But, if that’s not possible, keep an eye out for more promotional lower interest rate credit cards and transfer the funds to that card.

It’s wise to cash out any investments, stocks, or savings to pay-off your credit card, the interest you are paying on your credit cards is higher than the interest you’re earning in your stocks, investments or savings account. Basically, paying off your credit card debt is tantamount to getting an 18% return. You can also borrow against your life insurance; borrowing against your life insurance the interest rate is usually below commercial rates and below your credit card interest rate and you can take your time in repaying the this loan, but do repay it. 401(k)s are another source for you to borrow from, you usually can borrow up to 50% of the accounts value and the interest rate is usually one to two points above prime, which is still cheaper than the interest found on your credit cards.

If you can’t pay more than the minimum, you don’t get promotional lower interest rate credit cards in the mail, you don’t have investments, stocks, savings, life insurance policy or a 401(k) plan to cash in or borrow from, then it’s time to hit up your family members. You can work out a payment plan and they most likely won’t charge you an interest rate. If family won’t come through for you, you might just consider bankruptcy, which really is a last resort, because a bankruptcy on your credit report does not fare well, and any future credit you might qualify for will be double or even triple the interest rates you have today.