One of the main culprits that can drag you down into the depths of debt despair is a credit card. While it provides simplicity and ease of use, it can quickly spell trouble if you spend more than you have in the bank to pay it off.
We get it. You can use them almost anywhere, and the airline and hotel loyalty points and perks that come with them are big draws. Still, there is no reason to carry credit card debt. You should put the money you use to pay off debt toward that dream vacation rather than invest in the points earning.
“Wherever you are planning on traveling to, being in control of your finances will make your experience even more amazing,” says Amar Hussain, Senior Content Contributor and Budget Travel Expert from the Upgraded Points blog. “Worrying about getting into debt on your credit cards or not having the cash in your pocket to really explore the region will ruin your adventures.”
If you are someone quickly tempted by the purchasing power of a card without the cash to back it up, you are more suited to a debit card or should simply pay in cash. Monthly interest payments are needless if you can find ways to escape the endless cycle of debt. Here are a dozen ways to quickly pay off credit debt and release yourself from the shackles of bank payments.
- Pay off two months at a time. The faster you can pay off debt, the better most experts say. Paying more than you typically owe can help drop the overall sum of interest payments and lighten your load in the long run. It takes just a few daily habit changes to lower the cost of your daily spending so that you can put those funds aside to pay off debt.
Since the interest on your balance compounds daily, the faster you can get rid of the total amount you owe, the better. That’s why paying more each month or more often each month can prove so fruitful. It requires determination on your side to forego the extras that normally cost you extra cash so that you can put that same amount of money toward paying off debt.
Keep an eye on the interest you owe over time (in other words, extra cash paid to the bank with no return in your favor). The faster interest payments go down, the more money you will have to spend on things you actually want. Why are you paying the bank to use your own money (albeit in advance of actually earning it)?
- Keep credit card balances low or nil. If you’re tempted to spend the money currently in your pocket, pay off your balance online the minute you get your paycheck. The lower your debt, the easier it is to bring your credit score back up. For extra motivation, write down how much you pay in interest each week. As you watch that number go down, you will start to find your financial mood begins to perk up!
Consider freezing one of your credit cards if you are tempted to spend on it. Hide it in a drawer, remove it from your automatic payment lists or even stuff it in the freezer (to literally freeze it rather than telling the bank to suspend it for a period of time) so that you won’t be tempted to use it for extraneous purposes.
- Set a goal. If you have a monthly goal to achieve, it can make it easier to work towards the savings that will help you get there. If you can pay off a few extra dollars of interest per month, you can achieve your goal even faster. It’s easy to find that extra cash by spending a few dollars less on the unnecessary extras that you may not need like that daily cup of gourmet coffee or going out to lunch at work instead of bringing your own.
Let’s say you want to save $5 a day. Make that a priority, and do whatever you can to achieve it. If it means fashioning a makeshift meal out of whatever leftovers you find in your fridge or pantry, then do it. You might even get satisfaction out of cleaning out the extra things you have stocked in your pantry.
- Create a monthly plan for spending. This can help you better manage your spending while keeping an eye on the amount of cash you have in hand. Cover those payments that are on fixed monthly amounts first (electricity, internet, food, etc). These are necessities that should not be foregone in exchange for more frivolous purchases.
If you create a balance by writing down monthly expenses against the funds you have to pay for them, you’ll notice the disparity. That is what is leading to extra fees and credit card debt. It’s a surefire way to help you reduce the amount of money that you owe the credit card companies by psychologically showing yourself how much more you are spending than what you have.
Find ways to cut your spending by $5 a day. Maybe it’s skipping that expensive morning coffee or packing your own lunch. This type of mental exercise can help you from being triggered into extra expenses in the long run that you cannot afford. Skipping a daily Starbucks drip coffee can really add up. That’s an immediate $3 savings, and if you do that for five days a week, that’s $15 per week or $60 per month. Consider how many other habits you have that can be adjusted daily (or even just weekly) to accrue more cash in a jiffy.
- Never miss a payment date. Be conscious of when your monthly credit card payments are due. The last thing you need is to pay even more fees to use your own cash. Late-fee penalties are a terrible idea and only add to the cost of credit card debt. If you can plan accordingly so that you are not wasting extra cash on paying off credit card debt, you can save extra cash that was needlessly directed toward the bank.
- Understand your interest rates. Why would you want to fork over extra cash to the bank? Ask for an amortization table or speak with your banker to learn how much you owe the bank plus interest each month for the next year. This is also a good strategy to use if you have a mortgage and want to pay it off sooner and save a few extra months of needless interest payments. Once you see the way your late payments are costing you extra cash with no additional benefit, it becomes immediate motivation to pay off debt as fast as you can.
Every penny you save counts. Keep a savings jar or envelope. Put as little or as much as you can each day. Make a daily habit of contributing something, even if it is something small. This repetitive behavior creates a sense of satisfaction that you are moving closer toward your goal of paying off debt or at least reducing the monthly interest you have to pay.
- Pay off the high-balance cards first. If you don’t already know the interest rate you are paying per credit card already, you shouldn’t be using it. This is an imperative step to take. Each time you buy something using the card, you need to be tacking on the interest percentage to that cost. In other words, that is the amount it is costing you to carry that debt for one month. Just imagine how much it compounds if you keep carrying that debt from month to month!
If you have multiple cards, you need to hide the one with the highest interest rate in a sock drawer and stop using it. Also, you need to pay that one off first since it is costing you the most to carry extra debt.
Some people may need to continue using a credit card for essentials like electricity and heat to care for loved ones. If you must, be sure to use the one with the lowest rate. If one card charges 3% and another 5%, the latter should be your main focus to pay off first. And you should cut your spending on the other card as much as you can, too.
- Move to a balance transfer credit card. Balance transfer cards typically charge no interest for up to 18 months allowing you extra time to fund the essential expenses that you must put on a card in the first place, and if you can improve your credit, you may become eligible for one. If someone in your family has better credit than you, encourage them to get one of these cards and let them handle the essential expenses. You can shelve the high-interest card and work on paying back the debt while you have buffer time with the balance transfer card’s lower (or no) interest rate period. This is one of the best ways to improve your debt balance.
Just remember, don’t repeat the same mistake of buying things that you cannot afford on this new card. Eventually, it will begin to carry a balance, too, and you may wind up in twice as much debt.
- Look for a loan. Consider an online loan (or even a loan from a friend or family member) that carries a lower interest rate. Online lenders or local banks can help you with a loan that allows you to pay off the credit card debt in full (thus avoiding that hurtful cycle of high interest each month) in exchange for a lower interest rate. In fact, you may find several companies willing to help you do this to make a buck while you save money paying higher interest in the process.
“Shop around” your debt. You may be able to find unconventional sources that will offer a lower interest rate. And if you personally know the person that you owe money to, it may be harder to carry that debt onward from month to month. Bank interest rates for a personal loan can sometimes be lower than those of credit cards. If you cannot avoid debt, at least find a way to lower the interest rate that you are paying. Many online banks (versus brick-and-mortar banks) have become involved in this type of loan.
- Do side jobs for extra cash. This doesn’t have to be as difficult as it sounds. Side jobs are a respectable way to earn extra cash while honing your best skills even further. If you’re a good cook, consider baking food and selling it to friends and neighbors for their special events. If you’re good at math or playing an instrument, post your information on community message boards to become a tutor in those areas and make extra money. There are loads of extra jobs you can do to pick up extra funds, but make sure that you take the cash you earn and put it entirely toward debt (rather than being tempted to spend it frivolously).
- Keep saving long after you’ve paid off debt. Once you’re successful and have made a dent in your debt or paid it off completely, keep finding new ways to reduce your expenses. Clearly, you are spending more than you can afford, and if you continue saving money for a rainy day (even once you have paid off any existing debt), you have a buffer in case you run into debt another time in the future).
- Take advantage of cashback and rewards programs. This is an easy and fun way to accumulate savings and feel rewarded at the same time. There are many cashback and rewards programs like grocery store savings programs, gas station rewards and even special offers at your local café (like buy 10 sandwiches and get the 11th for free). Don’t leave any stone unturned for potential cash savings.
A particularly easy one is the Fetch app, which allows you to earn cash in the form of free gift cards by scanning receipts from retailers like grocery stores and restaurants. You’d be surprised at how just a few extra minutes of your time can add up to free gift cards to your favorite retailers like, Target and Starbucks among others. You can then use those gift cards at those retailers rather than piling up extra debt putting expenses there on your high-interest credit card.
This step is one that you can do long after you pay off any debt you have or simply for fun even when you do pay off your credit card in full. Everyone loves free stuff so why turn it down!
Ramsey Qubein is a freelance travel journalist covering hotels, cruises, airlines, and loyalty programs from around the globe. He's a contributor to NerdWallet, Forbes, Fortune and more.