Eliminating Credit Card Debt in 2021
It doesn’t take rocket science to tell you that credit cards don’t just come with skyrocketing interest rates but they are looped in with poor mental health.
Common sense will tell you that the amount of dues and due dates and bills can stress anyone out. Studies show that there is a significant connection between debts and depression.
Some researches reveal that debt increase is directly proportional to depressive manifestations. In other words, as debt increases, symptoms of depression increase too.
Also, it’s interesting to note that these findings only apply to short-term debts like credit card debts and do not apply to mid and long-term debts. The reason is that the latter is considered as investments for the future as opposed to credit card debts.
Even if you don’t buy that and take that information into consideration, surely you know that credit card debts can be immensely overwhelming.
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Especially last year, many individuals used their credit cards to tie them over mostly when the pandemic ruined them. If you’re one of those credit-card-frazzled folks out there, take heart. You are not alone.
And yes, do take heart, there is a way out.
There is a way to get out of this credit card mess. But before we get into that, let’s try to understand why credit card debts are Overwhelming. That could actually be summed up in one word — interest. The interest rate is simply crazy high. And the math gets worse with credit cards with high-interest rates.
Another thing is, compounding interest. When you amass your debt and your bank charges interest on it, at first, you’re paying the interest on the money you used up. But later on, you will need to pay interest on both the debt and the interest.
In other words, interest is charged every day and it compounds every single day! That means the interest that you’re charged today will become a part of the following ensuing balance. Whew.
And what happens if you neglect to pay your monthly due? You will incur late charges on top of your new balance and interest. That means you’re not only paying interest on your balance but also on late charges plus interest.
And if you neglect to pay another month, the interest will go on top of another interest. And pretty soon it’s an avalanche of debts.
Now how do you get off this vicious pattern?
Get a new card. You’re probably raising your eyebrows in disbelief.
Well, it doesn’t stop there.
Get a new credit card with an offer of the balance transfer. Transfer your worst debt to this new card. This works because some credit cards offer special rates on balance transfers when you apply.
Some offers do not charge interest on your existing debt when you move it from your other credit card to your new one. By doing so, you can put all your debts together and save a pretty penny on the interest fees.
But first, it’s best to identify your worst debt. This won’t be an issue if you only have one credit card with a crazy balance. However, some folks have more than one bad credit card. So it’s best to know which one has the worst debt.
Check out the balances and the interest rates and then compare. It goes without saying that the one with the highest interest rate is your worst debt. Center your attention here and for the other credit cards, ensure that you pay at least minimum dues in order to stay updated.
Okay, back to the new card with a balance transfer. Once you transfer your debt on your new card, you won’t be paying any interest on that balance. If there’s more space in your new card, try to transfer the other debts from your other cards. The goal is to get 0 percent interest on all your debts.
There’s another way to use your new credit card. Apply for an unsecured personal loan. That means you don’t need to have collateral against it. Personal loans are somewhat easier to get with your new credit card. But keep in mind that personal loans might have higher interest rates compared to the balance transfer offers.
Make sure you get a personal loan with a lower interest rate than what you’re paying. And don’t forget to do your own research, check out what are the factors you need to consider in personal loans. This will help you manage your growing debt.
In case of a worst-case scenario where you do not get qualified for both a personal loan and balance transfer, don’t despair. There are other ways. Anything that will help you rid your debt will help improve your credit history.
The next thing you can do is decide which among the cards you can pay off faster. Some people suggest that you should put additional funds on your remaining card with the highest interest rate. Common sense will tell you that it means you’re eliminating your highest debt first.
That’s a big load off your shoulder. However, other folks believe that putting extra money on your card with the lowest debt is better. It’s faster to get rid of and that means it’s a fast victory. It will give you that much-needed encouragement and will spur you on to pay the next one.
Whatever you decide on which plan of action to take, the point here is to do something about your debts. As soon as you see your debt slowly vanish and see fast results, that will help you pay off your debts faster too. Needless to say, once you wipe off the debt in one card, you’ll have more money to wipe off the next.
What a relief.
The best scenario of course is to lump all your debts together and put them on your new card and opt for a balance transfer or apply for a personal loan. Then keep at it. Be consistent in paying it off. The lower the balance the fewer issues to tackle.
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