How to Pay Off Your Credit Card Debt

Credit card refinancing and debt consolidation are two significant terms with similar meanings. The only thing that makes a difference is which one you choose. One of the two will get you a lower interest rate, and the other, on the other hand, will give you a time limit to pay off your credit cards. This guide will help you decide on how to pay off your credit card debt.

How to Pay Off Your Credit Card Debt

If you are the kind with severe credit card debt and a high-interest credit card, you should know that you’re already living in an almost never-ending cycle of minimum payments and more debt. There are a few ways to get out of this problem; credit card refinancing or debt consolidation.

On a norm, it appears that they both accomplish the same goal, and to some degree, that may, of course, be true. But how they do their work can be very different. For this sole reason, if you’re planning on choosing either, you should first decide which is most important; getting a lower interest rate or paying off your credit cards.

Also, See:

What is credit card refinancing?

Credit card refinancing is also known as a balance transfer. It is simply a process of moving a credit card balance from one card to another that has a more favourable pricing structure.

This literarily may be in the form of moving a $10,000 balance on a credit card that charges 19.9 per cent interest over to one that charges 11.9 per cent, as an example. Many credit card companies also offer cards with a 0 per cent introductory rate as an incentive for you to move a balance to their card.

With that, you can save eight per cent per year, or $800, by moving a $10,000 balance—just based on the regular interest rate. However, if the same credit card has a 0 per cent introductory rate for 12 months, you’ll save nearly $2,000 in interest just in the first year.

How to Pay Off Your Credit Card Debt

Credit card refinancing is more about lowering your interest rate. It appears to be less effective than debt consolidation at getting out of debt since it is purposely to move a loan balance from one credit card to another.

What is debt consolidation?

Debt consolidation involves moving several credit card balances over to a single loan with one monthly payment. Most times, debt consolidation can accomplish it by moving several small credit card balances over to one credit card with a very high credit limit and is commonly done through a personal loan.

RELATED:  How to Open the Starfield Console

Personal loans are unsecured, but on the other end, offers a fixed interest rate, fixed monthly payments, and a particular loan term which means that you’ll have the same monthly payment at the same interest rate each month until you have the loan repaid in full.

If you’re looking to eliminate credit card debt, debt consolidation is usually a more effective strategy than credit card refinancing. This is because a debt consolidation loan is paid off at the end of the term, while credit card refinancing keeps you in a revolving payment arrangement which means there is potentially no end.

Advantages of credit card refinancing

  • 0 per cent interest rate on balance transfers

Credit card lenders frequently make offers in which they will provide an interest-free credit line for a specific amount of time, usually six months to 18 months after a balance is transferred. As described above, this can result in substantial temporary savings in interest expense.

How to Pay Off Your Credit Card Debt

  • Quick application process

Whereas personal loan applications may take a few days to process and require paperwork to verify your income, a credit card application is typically a single online form, and, in most cases, you’ll get a decision within a minute or two.

  • You’re replacing one credit card debt with another at a better interest rate.

The most tangible benefit of a credit card refinances getting a lower interest rate. This can occur either in the form of the temporary 0 per cent introductory rate offer or through a lower permanent rate.

  • Your credit line can be re-accessed

    as it’s paid down

Since credit cards are revolving arrangements, any balance you pay off can be accessed later as a new source of credit. Once the line has been paid off completely, you will have access to the entire balance once again.

Disadvantages of credit card refinancing

  • 0 per cent interest rate will come to an end

As attractive as a 0 per cent introductory rate is, they always come to an end. When they do, the permanent rate is usually something in double digits. It’s even possible that the permanent rate will be higher than what you’re currently paying on your credit cards.

  • Variable interest rates

Unlike debt consolidation loans with fixed rates, credit card refinances are still credit cards and therefore carry variable rates. The 11.9 per cent rate that you start with could go to 19.9 per cent at some time in the future.

  • Balance transfer fees

This is a little-known fee charged on nearly every credit card that offers a balance transfer, particularly with a 0 per cent introductory rate. The transfer fee is generally three to five per cent of the amount of the balance transferred. That could add as much as $500 to the cost of a $10,000 balance transfer.

You may never pay off the balance.

  • You may never pay off the balance.

Since credit cards are revolving arrangements, there’s an excellent chance you’ll never pay off the balance. That’s because, at a minimum, your monthly payment drops as your outstanding loan balance falls. This is why credit card refinancing is usually not the best way to eliminate credit card debt.

Advantages of debt consolidation

  • Fixed interest rate

Though it’s possible for personal loans to have variable interest rates, most have fixed rates. This means that your rate will never go up.

  • Rate may be lower than what you’re paying on your credit card

In many cases, particularly if you have strong credit, you will pay a lower interest rate on a personal loan than on your current credit cards. It’s possible to get individual loan rates in single digits.

  • Fixed monthly payment

This means that your payment will remain constant until the loan is fully paid.

  • Definite payoff term

Personal loans carry a fixed term, and your debt will be fully paid at the end of that term. This is why debt consolidation using personal loans tends to be a more effective way to pay off revolving debt than credit card refinancing.

RELATED:  How to Fix Emails Stuck in Gmail Outbox

Disadvantages of debt consolidation

  • Payment never drop

For example, if you’re paying $400 a month on a $10,000 loan, the payment will still be $400 when the balance has been paid down the $5,000.

  • Origination fees

Personal loans typically don’t have balance transfer fees, but they do have origination fees that function similarly. Depending on your credit, they can range between one and six per cent of the new loan amount.

  • The more involved application process

personal loans usually require a formal application process. That will include a credit check and that you supply documentation verifying your income and even certain financial assets.

It might set you up to run up your credit cards again—one of the hidden dangers in any debt consolidation arrangement is the possibility that you may use the consolidation to lower your monthly debt payments but then run up the credit cards that have been paid off.

Which is right for you?

If you’re mostly looking to lower the interest rate you’re paying on your current credit cards, credit card refinancing may be the better choice. Just be careful not to be too heavily focused on a 0 per cent introductory interest rate offer. That only makes sense if the permanent interest rate on the new credit card is also substantially lower than what you’re paying on your current credit cards.

If your primary interest is to pay off your credit card balances altogether, then a personal loan debt consolidation will be the better choice. The fact that personal loans have fixed terms, usually three to five years, makes it more for you to get out of debt completely.

Which is right for you?

Whichever your choice is, carefully evaluate the interest rate and fees on the new loan, and never forget to expect the worst scenario!

Found this post on how to pay off your credit card debt helpful? Endeavour to share!

Goodness

37 thoughts on “How to Pay Off Your Credit Card Debt”

  1. Pingback: How to Fix BOQ App Not Working - DC Election News
  2. Pingback: How to Fix BOQ App Not Working - MINNEAPOLIS News Release
  3. Pingback: How to Fix BOQ App Not Working - Manassas News Station
  4. Pingback: How to Fix BOQ App Not Working - MCLEAN Gazette
  5. Pingback: How to Fix BOQ App Not Working - Hybla Valley News
  6. Pingback: How to Fix BOQ App Not Working - Milwaukee City Buzz
  7. Pingback: How to Fix BOQ App Not Working - Winchester Gazette
  8. Pingback: How to Fix BOQ App Not Working - Minneapolis Daily Info
  9. Pingback: How to Fix BOQ App Not Working - Columbus Daily Bulletin
  10. Pingback: How to Fix BOQ App Not Working - Arlington Dispatch
  11. Pingback: How to Fix BOQ App Not Working - Virginia Beach Story
  12. Pingback: How to Fix BOQ App Not Working - Christiansburg Gazette
  13. Pingback: How to Fix BOQ App Not Working - Washington DC News Station
  14. Pingback: Find out how to Repair BOQ App Not Working » Dextrava.com - hustletale.com
  15. Pingback: How to Fix BOQ App Not Working » Dextrava.com – Umi News Cast
  16. Pingback: How To Fix BOQ App Not Working » TheNobleNews
  17. Pingback: How to Fix BOQ App Not Working - Columbus News Info
  18. Pingback: How to Pay Off Debt Fast With No Money - Christiansburg Gazette
  19. Pingback: Cómo avalar deudas rápido sin patrimonio » Dextrava.com - My CMS
  20. Pingback: How To Pay Off Debt Fast With Low Income » TheNobleNews
  21. Pingback: Cómo respaldar rápidamente una deuda de bajos ingresos » Dextrava.com - My CMS
  22. Pingback: How To Pay Off Debt Fast With No Money » TheNobleNews
  23. Pingback: How to Pay Off Debt Fast With No Money » Dextrava.com – Umi News Cast
  24. Pingback: How to Pay Off Debt Fast With Low Income - Columbus Daily Bulletin
  25. Pingback: How to Pay Off Debt Fast With Low Income » Dextrava.com – Umi News Cast
  26. Pingback: How to Pay Off Debt Fast With Low Income - Arlington Dispatch
  27. Pingback: How to Create and Use a Budget - Capitol News Station
  28. Pingback: How to Create and Use a Budget - Columbus Daily Bulletin
  29. Pingback: How To Create And Use A Budget » TheNobleNews
  30. Pingback: Cómo crear y utilizar un presupuesto » Dextrava.com - My CMS
  31. Pingback: How to Create and Use a Budget » Dextrava.com – Umi News Cast
  32. Pingback: 11 Ways to Save Money Fast on a Low Income - Columbus Daily Bulletin
  33. Pingback: 11 Ways to Save Money Fast on a Low Income - Minneapolis Daily Info
  34. Pingback: Everything You Need to Know Before Taking Out a Home Equity Loan – Merablue.com
  35. Pingback: How Many Credit Cards You Should Be Carrying – Merablue.com
  36. Pingback: How to Finance a Land Purchase – Merablue.com
  37. Pingback: भूमि खरीद का वित्तपोषण कैसे करें » Livetechnoid.com – Tips4Earning.Com

Comments are closed.