7 Best Way To Payoff Credit Card Debt In Canada
I know the thought of paying off your huge credit card bill can be very daunting. Thanks to credit cards, it has made our lives way too simple. Now, one can afford stuff even if it is out of budget.
As a result, this can lead to impulsive shopping. You often end up buying things that you don’t require. Impulsive purchases not only burn a hole in your pocket but also build a pile of debt.
However, if you use them wisely, credit cards can be a blessing too. It is perfect for handling large expenditures if you are disciplined enough.
As of now, you might be frequently holding more credit cards than necessary. This leads to carelessness while utilizing them wisely.
And due to a lot of credit cards supplied by credit card providers, you may end up in debt traps. So, now is the time to take essential steps before things turn worse. Else it will be harder for you to get out of this scenario later.
So, one should consider this as a warning sign. Then, the first step is to start working towards financial discipline if your credit card balance is increasing on your monthly bills.
The same is also applicable if it is getting difficult for you to pay your credit card bills.
The need of being debt free
One’s entire financial condition may be impacted by credit card debt in several ways. Due to interest rates, your balance might eventually increase. If you’re simply making a minimum payment each month, it can take a while to pay off the debt in full. Also, fines for any missing or late payments might pile up.
For starters, credit ratings are partly based on credit utilization. If you are using the entire card amount, it can potentially hurt your credit score in the near future.
Well, there’s another great benefit of paying off your credit card debt. You can have more space to boost your savings. Moreover, if you pay on time, you can earn cashback rewards too!
With that in mind, let me give you the 7 best ways to pay off credit card debt in 2023. So sit back, relax, and keep scrolling…
Avalanche Technique
List your debts in order of lowest to highest interest rate. You have to make a minimum monthly payment on each, right? But, I advice you to put all of your additional money toward the one with the highest interest rate. This method of sorting is popularly termed as the “avalanche” way of repayment.
This technique is effective for saving money. It is because you’ve paid the least amount of interest altogether when compared to other strategies.
Say, you set aside $250 every month to pay off debts. You should prioritize paying off the loan with the highest interest rate first. When that loan is paid off, you may direct that money toward the debt with the next-highest interest rate. This way you can get rid of them one by one more quickly!
The key to this plan is to stick to the monthly debt payment of $250. You continue to make the payment even after one card has been paid off. As a result, you can carry it over to the next card to increase the payout.
This method is quite old, yet the most effective. So, go ahead and give it a shot!
Cut back on spending
It’s a no-brainer that spending less will allow you to pay off debt faster. It can sometimes even save money on your interest. Here are some strategies for keeping tabs on your spending and reducing it:
Establish a budget
Together with your debts, such as credit card balances and school loans, make a list of your regular monthly expenses, such as rent, electricity, and food. Write out your monthly take-home earnings. Then deduct your expenses and minimum debt payments.
The amount you have left over is a good place to start. Now you can figure out how much additional funds to devote each month toward paying down your debt.
Set a target
Determine how long it will take to pay off the debt after you are aware of how much you owe. Also, have a clear cut idea on how much you can afford to pay each month. Make a note of that day on your calendar. You may remain motivated and concentrated by having a goal in mind.
Maintain a spending record
Use whichever approach suits you the best, whether it’s a spreadsheet, an app, or a pen and paper. Every purchase you make should be noted. You should revisit the record periodically.
This is a great way to have a better understanding of your spending patterns. You can perhaps identify areas where you can make savings.
Tell a friend or relative
Your friends and relatives may be willing to lend help if they are aware that you are attempting to pay off debt. They could also inspire you to come up with spending plans or free activities that will help you stay to the objective while still living your life.
Creating an achievable goal
Setting realistic financial goals and preparing a budget is crucial. It ia all more crucial if you have a lot of debt to pay off. It could be the first stage of you developing a financial discipline. This will accelerate the process of getting out of debt for sure.
To establish realistic objectives, keep track of your spending habits. You must put that lavish spending under check for a while.
Moreover, impose spending caps on your credit card right now. I know that initially this might be a tad difficult. But it will be worthwhile in the long run.
If you are unable to curb your spending, atleast lower your credit card spending limit. In this manner, any expenditures over the specified cap will be instantly rejected.
Along with reducing your spending, boosting your income by taking on a side job will enable you to pay off your debts more quickly.
Debt Consolidation
To pay off your debt, you must first understand the various debt management strategies. Then, pick an effective way of repayment. Maybe, consider combining all of your debts (including credit card balances) under one roof. This will help you manage them all more easily and avoid missing any EMIs.
Additionally, you can be given a debt consolidation loan with a lower interest rate. This would enable you to save some money on interest. When you have several small-balance debts that you are finding it difficult to repay, opting for a “personal loan for debt consolidation” or a secured loan like a “loan against property” or “home refinancing” to fulfil your obligations makes sense.
By merging your debts into a single EMI to be paid at a relatively lower rate of interest, a debt consolidation loan can help you better manage your situation.
To lower the cost of the monthly EMI, it also provides a longer loan term. To reduce the amount of interest paid, it is advised to pay off the debt consolidation loan as soon as feasible.
Additionally, a “personal loan for debt consolidation” has a substantially higher interest rate than secured loans. So, go for this if you are on the point of becoming trapped in debt. And in case you need to better manage your obligations should you give this alternative some thought?
In case the interest rate on the debt consolidation loan is lower than the interest rates on your credit cards. Debt consolidation may make it simpler and less costly to pay off your debt.
A benefit of debt consolidation loans is that your credit score may improve if you make your monthly payments on time and in full. If you satisfy the requirements, you might be able to save money on your credit card debt. The finest debt consolidation loans typically have lower interest rates than credit cards.
Setting Up an Emergency fund.
If you’re one of the many people who don’t have a wholesome emergency fund, overusing your credit cards is a trap you may slip into. It is more damaging if expenditure reduction or borrowing from friends and family are not feasible options.
Before paying off debt, you must first focus on increasing your savings.
Before you begin focusing on your debts, you must increase your short-term savings by at least $100. Also, make sure to pay the minimum payments on your current credit cards.
In this manner, you can pay from your savings rather than using your credit card in times of dead “pay off debt” emergencies.
Additionally, one’s salary too might not be enough to think about some savings. In that case, you will need to either boost your income or reduce your spending. The ideal situation would be to carry out both.
Remember that utilizing credit cards to carry extra living expenditures is not the solution.
Start using cash
If your main goal is to pay off your credit card debt, I am sure you won’t like to add to that debt by charging your expenses.
I strongly suggest you stop using your credit cards. Although it sounds simple, it is easier said than done.
Paying in cash will prevent you from accumulating further debt. Furthermore, it helps you in spending less. Also, you need to manage physical bills.
All in all, it makes purchasing less convenient. This will automatically lead to fewer purchases.
Activate Auto-Pay facility
Your invoices will be automatically paid from your registered bank account on the due date. Yes, it is possible if you use the auto-payment feature on your credit card. You can avoid the bad effects of late payments by using this feature with ease.
You can also make sure you never miss a credit card payment. So, arrange an Auto-Pay to make the entire or minimum payment as soon as it becomes due. I would suggest you to set an Auto-Pay for the entire amount due for every month.
Summing Up
I know that it is somewhat overwhelming to deal with credit card debt. But if you have the knowledge to address it, you may eventually get over it. There are many different strategies you can choose from!
Even one of the simple strategies I’ve discussed above is enough to pay off your credit card debt quickly. So, feel free to pick one that work best for you.
Lastly, do keep in mind that one should use their savings to achieve financial objectives rather than borrowing carelessly and falling into a debt trap. For this, all you need to do is set up an emergency fund. This fund will help you cover your expenses in dead times. In the end, it is you who has to make wise choices for yourself. Thanks for reading!
