Having multiple credit cards seems like a nice idea initially, until you find yourself burdened with the debt and stress that can come along with it. Here are some tips on how you can make that stress disappear by taking control of your finances.
The hardest part about paying off multiple debts can be not knowing where to start. You may feel like you want to start things the right way, which is good, but this can also make you hesitate when taking action.
Here are 3 different methods of paying your debts off, which can be used depending on how you would like to approach your repayments and how much you can afford to pay.
Smallest Debt First – This will help you simplify your debts and make them easier to manage by taking out the easiest ones to pay. If you have trouble managing multiple debts at the same time then this is a good option.
Largest Interest Rate First – This is a logical approach that aims to save you money in the long term by reducing the amount of interest you need to pay. If you have the money to spend now in order to save later, this option is a good choice.
Snowball Method – This method aims to pay off your debts as fast as possible. Make the minimum repayments for all of your debts except the smallest one, where you pay as much as you reasonably can. When you repay that debt, add the minimum repayment of that to the next debt. This continues until you are debt-free, but requires more money and financial planning than the other options.
Being Smart About It
If you know you are going to have trouble paying your debt, don’t be afraid to reach out for help. Talking to your credit provider can end in a repayment arrangement if you are having trouble making your repayments, and most financial counselors will provide some sort of free service to help you tackle your debt. Even using an online credit calculator to help decide how to make your repayments is a step in the right direction.
Managing Your Accounts
Once you have finished repaying your debt, cancel your credit card and close the account. You may have fees to pay to keep the account open, but more importantly, you will deny yourself having the temptation to use the card again. This will help you stay on the right track and prevent future debt from becoming a problem for you again. Perth Broker notes that if you’re looking at maintaining a credit card still after paying these off, it may be worth packing it up with your home loan to save on fees.
If you decide that you would like to keep a credit card for emergencies, make sure you lower the limit on that account to something that you can pay off in a reasonably fast period of time. This will allow you to have the benefit of a credit card with a reduced risk of debt. Three months is a good period of time to aim for but adjust the limit and the time you want to pay it according to your budget.