If you’re like one of the millions of people in the world drowning in credit card debt, you may be wondering, “What’s the fastest way to pay off a credit card?” There was a time when I was as much as $20,000 in credit card debt. Yikes! How did I rack up this amount? Well, I bought a car with my credit cards, and used it for general living. Now, I realize how foolish it was to do so.
So I’ve “been there, done that” when it comes to credit card debt. I’ve also learned a few fast ways to pay off credit cards. There are several strategies you can use to pay off your credit card debt fast, and in this article, I’m going to cover some of the most popular methods below:
Fastest Ways to Pay Off Credit Card Debt
Method #1: Debt Snowball
This is a method popularized by people such as Dave Ramsey, a Christian financial guru. In this method, you start with the lowest balance credit card first, and pay as much as possible on that balance. This should, theoretically, help you pay it off more quickly. Then, once you have that credit card finally paid off, you move on to the next highest balance.
You go on and on until you become debt free.
Method #2: High Interest Blitz
What’s the downside to the debt snowball? Well, some people argue that you should start with the cards charging the most interest, and frankly, I tend to agree. Dave Ramsey has wonderful advice, and there is more than one way to skin a cat. But I would start with the credit card with the highest interest rate/fees, and pay that off first.
This is what I term the “high interest blitz.” In this method, find out which credit card is charging the highest interest rate. Then pay that card off first. This will save more money in the long run, although you may not have as much discretionary income as when you do the debt snowball.
If I had 2 credit cards, and one had a very high interest rate, while the other had a lower one, I’d definitely want to save all that interest expense and pay off the high card.
Method #3: Debt Consolidation
Another fast way to pay off your credit card debt is to do a debt consolidation. With this method, you try to get a loan with a lower interest rate, and lump all of the credit card debt into one consolidated loan. With this method, you can save on interest, which may help you pay it off much faster.
Furthermore, you’ll get the convenience of having only one single bill. The downside to this is that it may be hard to find a loan with a good rate, and if you have a lot of credit card debt, your credit score could be hurting.
You could consolidate in a number of ways: Refinance your home, take out a personal loan, etc.
Method #4: Withdraw Retirement Income
Another way to pay off that credit card quickly is to cash in on any 401k, IRA’s or investment accounts. Granted, any withdrawals that do not meet the IRS guidelines may be penalized. Nevertheless, if you are drowning in credit card debt, it could be a good move.
After all, credit card interest rates are often as high as 11-20%, and you aren’t likely to earn that kind of a return on your investments or retirement anyway. So if you do have some stocks, bonds, IRAs or 401Ks that you can cash-in, now may be the time to do it. Just make sure to know what your penalties may be for early withdrawal.
Method #5: Negotiate With Credit Card Companies
This may seem too easy, but if you pick up the phone and call the customer service number on the back of your credit card, you may be surprised to find out that that the credit card company is willing to work with you. In other words, if you simply ask for a lower interest rate, many times they’ll do it. If you simply ask to remove a late charge, they’ll do it. If you need to push the due date back, they can often do it.
Negotiating is an important part of paying off debt, so don’t skip on this step to help you reduce rates and make your credit card situation so that you can pay it off faster.
Method # 6: Credit Card Debt Forgiveness
This is more like a last resort, because it would be rare for a credit card company to cancel your debt. In fact, they usually only do this after you’ve neglected to pay your bill for years, and they realize they can’t get any more money out of you anyway. It’s also risky because you are almost certain to ruin your credit. Also, you’ll likely end up having to pay taxes on any amount they do forgive.
So while this isn’t a likely option, it is something to keep I mind.
Method # 7: Sell Your Junk on eBay, Craigslist, or Yard Sales
I’ve often said that most people have a minimum of $2-3,000 in pure JUNK that they have sitting around their homes. When I say junk, I mean stuff you never use or don’t want anymore. If you would get the gumption to simply start making listings on eBay or Craigslist, you can start making extra money that you can put towards your debt.
I am very particular about what I’ll keep. I’m not a pack-rat, and I will only keep something if I really like it or use it extensively. Otherwise, I sell it as soon as I realize I no longer use it much.
Method #8: Quit Spending Money
It goes without saying that if you are really trying to get out of debt, you need to stop spending all of your money on luxuries or things you don’t really need. Instead, put every bit of spare money you have towards paying off your debts, and hold off on those new outfits, vacations, the movies, etc.
The more you are willing to sacrifice, the faster you can pay off your credit card debt.