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Www Burlingtoncoatfactory Com Gift Card Balance - If you're struggling to manage your credit cards, you're not alone. Credit card debt reached an all-time high at the end of 2022, with the average credit card user owing $5,805. If it's easy to pay off credit card debt, it won't be too much.
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Because no one wants to lose their hard-earned money on interest. But getting off the mountain is possible with a combination of strategy, discipline and, in some cases, professional help. There is no single way to get rid of credit card debt, but a combination of the following methods can help you reduce your debt and get rid of it for good.
Making the minimum payment on your credit card can be a recipe for never-ending debt. Because even if you pay more to avoid late payments, you'll still be charged interest by carrying a credit card balance. "Often, consumers only notice that they pay interest and don't see the overall balance decrease," said Matt Biliouris, director of the National Credit Union Administration's (NCUA) Office of Consumer Financial Protection.
"By putting more into the minimum balance each month, you'll see the number start to go down." For example, let's say you have a $2,000 balance on your credit card and make a minimum payment of $100 each month. An APR of 20.40% - the current APR for credit cards - takes you 25 months to pay off the loan and costs you $453 in interest.
How To Pay Off Credit Card Debt
Conversely, by increasing your monthly payment to $150, you can pay eight months faster and save $172 in interest. The more you pay each month, the more money you can save. If you have multiple credit cards, choosing a payment strategy can help you stay focused and eliminate your balance.
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Experts generally recommend one of two methods of paying off credit card debt: the snowball method or the debt settlement method. Both strategies require that accounts be prioritized. Then you pay extra on the first card on the list, and keep the minimum payment on the other accounts.
After the first balance is paid off, you transfer those extra funds to the second balance on your list and continue this pattern until all of your credit card debt is gone. According to Biliouris, both strategies have advantages and disadvantages. But most importantly, they say, you make a payment plan and stick to it.
With the debt snowball method, you prioritize paying off the credit card with the lowest balance first. Once that bill is paid off, you focus on the minimum amount owed and so on. While it's not as cost-effective as paying off debt (more on that later), it can help people struggling with motivation because it quickly clears small credit card balances and creates quick wins.
How To Pay Off Credit Card Debt
With the debt settlement method, you prioritize paying off your APR credit card first. Once that balance is paid off, you'll put your extra money toward paying off the card with the highest rate. With this strategy, it may take longer to eliminate the balance than with the debt avalanche method, but the debt avalanche is the most effective way to save on interest.
If you're someone who wants immediate results, I recommend the snowball approach, but if you want to save money, the avalanche approach lowers the cost of borrowing," says Veronica Dangerfield, senior financial advisor at Patelco Credit Union. . "Whatever you choose, you want it to really motivate you."
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Getting a new loan may not be the answer to your credit card problem, but in some cases, a personal loan can help. This is because personal loans have much lower interest rates than credit cards, especially if you have good credit. As of February 2023, the average annual credit card rate on a 24-month personal loan was 11.48%.
The main advantage of using a personal loan to pay off credit card debt is that you can consolidate your balance with a lower interest rate, which means more of your monthly payment goes toward reducing large balances and eliminating debt faster. But there are other advantages as well as some disadvantages to consider.
1. Pay More Than The Minimum
If you intend to pay off your credit card quickly and have the financial means to do so, another strategy to consider is opening a 0% APR balance transfer card. These credit cards allow you to transfer balances from other providers in exchange for a temporary 0% APR period that usually lasts 12 months or more.
This means you can transfer your credit card balance and avoid a charge-off, but 100% of the payment will go toward reducing the principal. The key is to pay everything off until the introductory period ends and your card returns to its normal interest rate.
It is also important to note that although you will not pay interest during the introductory period, you will have to pay a one-time application fee of around 3%. If you still believe the interest savings outweigh the cost, it's probably worth it. For those with too much debt, credit counseling may be the best way to get relief.
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Certified credit counselors at the nonprofit agency can review your financial situation, offer professional advice, and guide you toward the right decision. These include: "It's a good idea to talk to a credit counselor," says Dangerfield. "They can use their expertise to provide insight into the credit card industry. They can even save your credit score by giving you recommendations and advice."
2. Choose A Payoff Strategy
When looking for a consulting agency, the Consumer Financial Protection Bureau (CFPB) recommends avoiding for-profit firms. Instead, it's recommended that you go to a reputable nonprofit organization like the National Foundation for Credit Counseling or the Financial Counselors Association of America. Biliouris adds that you can also contact your credit union, as they can offer free credit counseling services.
A high APR can make paying off credit card debt difficult, if not impossible. Without a strategy, you'll never see your balance drop, especially if you're still relying on credit to cover expenses and make minimum payments. Fortunately, you don't have to be stuck with credit card debt for life.
The best way to get out of debt depends on your situation, but may include prioritizing certain credit card accounts, getting a new loan or credit card to improve your credit, or seeking professional help. NOTE: Any advice, opinions or ratings in this article are the opinions of the Fortune Recommends™ editorial team.
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