Debt may seem like a fact of life for many of us, but that doesn’t mean it always has to be. If you find you’re getting overwhelmed with your monthly payments, if your credit card balances seem to be stuck at the same level, or are growing steadily, and you see no end in sight — it may be time to buckle down and create an action plan to get out of debt.
Debt is often a cycle — you put a large purchase on a credit card, pay it down, then find you need to make another big purchase and have to go into debt again to make it. In the meantime, you’re potentially putting your saving or retirement goals on pause, hurting your credit score and pushing off bigger goals like buying a home or taking a vacation.
When it comes to your credit score, your amount of debt is generally the second-most important factor (payment history is No. 1) – and the percentage of your available credit that you use can have a big impact on your scores. Experts recommend keeping your credit card balances at no more than 30% of your credit limits, but 10% or less is even better. You can get your credit scores for free on Credit.com, along with a breakdown of what’s impacting them – which can help you get a clearer idea of your financial picture.
So if you think you’re finally ready to get out of debt, here are some tips to help make it happen.
1. Get on the Phone
Sometimes the easiest way to lower your debt is simply by asking. If your credit score is better now than when you applied for the card and you’ve had a good history with your issuer, give them a call to ask if you qualify for a lower interest rate. The first representative you speak with may not be willing to hear it, but it’s worth it to try… or try again with a different representative.
2. Pay the Smallest Balance First
Known as the snowball method, this strategy involves using extra cash to pay off your smallest debts first, then moving on to larger balances. This method can help keep you motivated since you can check debts off the list faster, even though you may lose a bit more money to interest charges in the long run. Make a list of all your debts, noting the debt with the lowest balance at top. From there, put as much as you can afford toward crushing the debt.
3. Make a Big Impact
This method involves offloading a payment by throwing a huge chunk of money at a debt. It isn’t for everyone—and you may feel the pinch—but if you need to get out from under a payment and you have the means, it can smooth out your budget and (bonus!) free up more money to put toward other debts… or even your savings. This is a good option if you have an unexpected windfall like a big tax refund or an inheritance.
4. Start a Debt Avalanche
Impatient debtors may not be so keen on this method, which involves paying off debts from largest interest rate to smallest interest rate. As you pay whatever you can on the debt with the highest interest rate, you make the minimum payments on other debts. Then, when you’ve finished paying off one debt, you add the money from that payment to the debt with the next highest interest rate, and so on.
5. Get a Balance Transfer Credit Card
No, we’re not saying to rack up more debt. The idea here is to move a big balance from one credit card with a high interest rate to one with a lower interest rate, or zero introductory rate. (Here’s a guide to how balance transfer credit cards work.) You’ll end up spending less on interest charges, which, again, can help free up more money to put toward your debt. Just be careful that you continue to make on-time payments and also be aware that there will likely be a small balance transfer fee. Read the terms of any credit card carefully before you apply.
For more ideas, see the full list of 12 Ways to Finally Get Rid of Your Debt.
- The Best Balance Transfer Credit Cards in America
- Chase Slate: A Great Bet If You Need Some Debt Breathing Room
- 5 Tips for Consolidating Credit Card Debt
This article originally appeared on Credit.com.
This article by Kali Geldis was distributed by the Personal Finance Syndication Network.