Fast Ways to Pay Off Credit Cards

Kathleen Esposito
Cutting Cards

Most people want to pay off credit cards quickly so they can get out from under the burden of all of those interest charges. There are several things you can do to try to make that magic debt-free day come along sooner rather than later.

The Laddering Method

One of the most effective tactics to pay off debt is the laddering method. To use this method, follow these steps:

  1. Collect all of your credit card statements and rank them in order by interest rate. Put the card with the highest interest rate first. Call this one Card A.
  2. Starting this month, pay only the minimum on all cards except Card A. Pay the minimum plus any extra funds you have toward that card. Continue doing this each month until you pay it off.
  3. Next, move on to the card that has the second highest interest rate. Continue paying the minimum on the other cards. But this month, pay the minimum on card B, plus the amount you were paying on Card A each month. You already adapted your finances to using that money to pay off debt.
  4. When you get to the third card, pay the amount you were paying on Card B each month, plus the minimum, and so on and so forth. Eventually, you will have a large sum of money to put on that last card, making it easy to pay it off quickly, especially since you will be paying far less in interest.

The Snowball Method

Some people have trouble sticking to the laddering method because it can be slow-going at the start. If you're one of these people, you may want to try the snowball plan instead. Financial guru Dave Ramsey recommends it to his advisees. It has the same theory behind it as the laddering method, but instead of starting with the credit card with the highest interest rate, you start with the card with the lowest balance. Being able to get rid of credit cards more quickly could be more motivating for you.

Transferring Your Balances

If a lot of your cards are store credit cards, or other cards with interest rates of 20% or higher, you could save more money by transferring your balances to one card than simply by paying them off as is. Note that most credit cards have balance transfer fees, which will charge you a percentage of your balance upfront. Look for 0% promotions and try to take advantage of those deals if you can. These promotions are almost always for a limited time, such as the first six months of the transfer, so take your vow to pay off your credit cards seriously, and try to finish in that time limit. Transferring balances over and over can be detrimental to your credit score.

Borrowing Money

It probably seems counterproductive to borrow money to pay off debt, but one of these three options could help you reduce your interest rate and eliminate credit cards quicker:

  1. Debt consolidation loan -- Get a loan for the total amount of your balances. Look for options at community banks or credit unions. They tend to have lower rates than national banks.
  2. Borrowing from your 401(k) -- Borrow money secured by your retirement plan. The consequence for not repaying it is high, and it's especially risky if you plan on changing employers in the near future.
  3. Home equity loan -- Use your house as collateral for you loan and get a good rate and a possible tax deduction. Don't repay this one and you can lose your home. Approach with caution and don't borrow more than you need.

Keeping Cards Paid Off

The less money you spend on things you don't really need, the more money you will have to put on your credit card. It is difficult to decrease the balance on a credit card when you continue to use it. Use a debit card, check or cash if at all possible.

Can't help using those credit cards? Take them out of your wallet. Some people put them in bags of water and place them in the freezer. The time it takes to thaw your card out will give you an opportunity to rethink your priorities.

Paying credit cards off quickly takes some willpower. The end reward is well worth the sacrifice it will take to get there.

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Fast Ways to Pay Off Credit Cards