Everyone knows that it can be hard to make ends meet when you are young. Because of this, credit cards are often used to supplement income, or pay for large expenses. A new study from Ohio State University shows that today’s younger generation has significantly more debt than their parents did.
Just because you have a lot of debt, or are using your credit cards more frequently than your parents might have, it doesn’t mean it will hurt your finances. There are a few simple strategies you can take to help stay on top of your credit card debt and work to pay it down at the same time.
Stop Using Your Credit Card
If you want to pay off your debt, you have to stop adding to your debt. The first month you find yourself unable to pay off your credit card in full, you should stop using any credit until you can pay it off. We understand that it can be tempting to want to get your rewards points or money back. But it’s never worth it if you end up overwhelmed by debt you have to pay interest on every month. To help with this, take your credit cards out of your wallet and stop any auto-payments. Those things do add up quickly.
Pay Off Any New Debt
Although you should try to avoid using your credit card while you are paying off your debt, sometimes it might be necessary. If that is the case, at the very least be sure to pay off any new debt you put on your credit card each month, plus the minimum payment. For example, if you put $200 on your credit card and have a $100 minimum payment, you should pay at least $300 towards your card to help you keep making progress.
Pay More than Minimum Payment
We’re sure you’ve seen the math, but if you just make the minimum payment on your credit cards, it’s going to take you an outrageous amount of time to pay off your debt. Additionally, it’s going to cost you a lot of money in interest at the same time (often 2-3 times the principle, depending on your interest rate). Instead, pay more than the minimum. Obviously, you don’t want to pay so much that you end up having no money left during the month, thus causing you to use your credit card again. However, pay as much as you can, even if it means cutting back in other areas of your life.
Make Two Payments Each Month
Most people get paid twice a month (or every other week), so why not pay down your credit card every time you get paid? Not only will it help you spread out your payments, but it will also save on interest by cutting down the principle quicker each month.
Set a Payoff Date
Another way to figure out how much to pay each month is figure out when you would like the debt to be gone. Is it 3 months? 6 months? 12 months? Whatever it is, take your total debt and divide it by the number of months. Make that number your monthly payment. Now, you will have to consider the amount of interest that will be charged while you pay off your debt. To account for the interest expense, add on extra each month or understand that you might have to make an extra payment after your payoff date.
Having extra credit card debt can be stressful and could prevent you from reaching your financial goals. Creating a plan to eliminate your credit card debt will help you pay it off quicker and provide you with peace of mind.
If you have questions about this or would like help setting up a plan to pay off your debt, please feel free to contact us at 800-835-3400 or ask a Member Advisor in the branch. We would love to help however we can.