Climbing your way out of debt can be disheartening, often because it is difficult to decide how to go about it and where to begin. It is all too easy for debt to take control over every aspect of our finances and even our personal lives.
According to the CreditCards.com Canadian website, in the third quarter of 2016, the average Canadian had $3,954 in credit card debt. This was an increase from the previous year and shows that repaying credit card debt is an issue faced by a majority of Canadians.
Fortunately, with a push in the right direction, you can not only eliminate your debt reasonably quickly but also avoid letting it pile up in the future. Take a look at these 5 simple steps to repay credit card debt.
The importance of budgeting to repay credit card debt
You would likely be very surprised at how much money you can save with a proper budgeting system. Here’s an experiment to start today:
- Determine your monthly expenses (rent, food, travel, entertainment, etc.)
- Make a logbook to keep track of income and expenses
- Reserve a portion of income to repay credit card debt
- Find out where you can save money (nonessential spending)
Once people find out just how much they are unnecessarily spending each month, they tend to respond more positively to a monthly budget. There’s no excuse not to give budgeting a chance, especially with the availability of finance apps that do most of the hard work for you.
Eliminate non-essential Expenses
Cutting non-essential costs is one of the most effective ways to start repaying your credit card debt in a timely fashion. Once you’ve come up with your budget and discovered your what your monthly expenses look like in comparison to your income, you can begin trimming the fat away from your finances.
Seemingly little, insignificant expenses become far more substantial when we look at the bigger picture. Something as simple as cutting $10 from your weekly grocery list can save you upwards of $500 per year.
Repay Over the Minimum
It’s important to make sure to pay over the minimum required on your credit card balance. When you only pay the minimum balance itself, you are just covering the interest on the principal balance, which certainly doesn’t help in the long run.
Paying only the minimum amount required each month can actually make your bill grow on a monthly basis, preventing you from effectively repaying credit card debt.
Contact your credit card company
If you find yourself in financial distress, it can sometimes be wise to contact your credit card company. These companies will often be willing to lower your interest rate for a set amount of time and defer late fees to give you a chance to get your situation in order.
Having a good credit history is useful here as it will show that you have been trustworthy and give you leverage in the conversation.
Personal loan as an option
If planning a budget isn’t your thing and you’re looking for the quick way out, opting for a personal loan to repay your credit card debt is something to consider. If you’re worried about your credit score taking a hit, getting a loan without credit check means that your credit rating isn’t at risk.
The most efficient way to repay credit card debt is to get in the habit of budgeting and eliminating any non-essential expenses to free up your finances. It’s also very important to pay over the minimum balance each month to avoid drowning in debt.
Contacting your creditor can also sometimes yield positive results, as well as using a personal loan to repay your credit card debt quickly.