7 Strategies for Paying Off Multiple Credit Cards
If you’re facing credit card debt that’s negatively impacting your finances, you have a few options to help relieve that pressure and get yourself back on track to good financial health. Paying off multiple credit cards can be challenging, but with a well-thought-out strategy and disciplined approach, you can make significant progress in reducing your credit card debt. Here are seven strategies to help you pay off multiple credit cards:
Set Clear Goals
Define your financial goals for paying off your credit card debt. Whether it’s becoming debt-free, improving your credit score, or reducing interest costs, having clear goals will keep you motivated. Start by making a list of all your credit cards, including their balances, interest rates, minimum payments, and due dates. This will give you a clear overview of your debt and help you prioritize which cards to pay off first.
Prioritize High-Interest Cards
Focus on paying off credit cards with the highest interest rates first. This is often referred to as the “avalanche” method. This debt repayment method is a method commonly used for paying off student loan debt, but it works for credit card debt as well. You would pay off the credit card with the highest interest rate first and make minimum monthly payments on your other credit cards. After paying off the credit card with the highest interest rate, you’d move on to the next card with a high interest rate until you work your way through paying off all cards.
Using debt avalanche can help save on interest payments and speed up getting out of debt since you are minimizing interest. It can also help those with balances on multiple credit cards determine if there’s any “sore thumb debt” present.
Consider the Snowball Method
Alternatively, you can use the “snowball” method, that is instead of starting with a credit card with the highest interest rate, you would pay off the credit card with the smallest balance. After paying off this card, while continuing to pay the minimum payments on other credit card balances, you would eventually “snowball” your way up to credit cards with bigger balances and pay these off. This method provides a psychological boost as you see progress quickly. The debt snowball is the reverse of the debt avalanche.
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Pay More Than the Minimum Monthly Payment Each Month
Some credit card holders may only be able to pay the minimum monthly payment on their balances. If you can only afford to pay the minimum, making that payment will at least be able to protect your credit score and keep your account from becoming delinquent versus making no payments or constantly missing payments.
However, it is strongly recommended to pay a little extra than the minimum payment if you have the wiggle room to do so. Paying a little more than the minimum amount, even an amount like $10, can help shrink your overall balance and accelerate the amount of time it takes for you to get out of debt.
Stop Using Your Credit Cards
There are a few benefits that work in your favor if you decide to stop using your credit cards. The first is you will not be able to continue accruing a larger balance if you are no longer charging specific items to these cards. Cardholders may also consider cutting the cord on monthly subscriptions, like streaming services, which can continue hiking up your balance.
Those not using their credit cards on a daily basis may also be able to contact their credit card company to see if they can negotiate a lower interest rate. This will better enable you to be able to pay off your balance faster.
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Consolidate or Transfer Balances
If feasible, explore options for consolidating your credit card debt into a single, lower-interest loan, such as a personal loan or a balance transfer credit card. Be mindful of any transfer fees and ensure the new terms are favorable. Remember to read the fine print when considering how much debt can be transferred, whether you can or can’t complete a transfer between cards issued from the same bank and what your credit score needs to look like for a balance transfer.
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Reduce Unnecessary spending
Identify areas where you can cut discretionary spending to allocate more money toward your credit card payments. Consider temporarily reducing dining out, entertainment, or non-essential purchases until your debt is under control.
Remember, consistency and discipline are key to successfully paying off multiple credit cards. Stick to your chosen strategy and make consistent, on-time payments. As you pay off each card, reallocate those funds to the next card in your priority list. Additionally, avoid accumulating new credit card debt while you’re working on paying off your existing balances. Over time, your efforts will help you become debt-free and improve your financial health.