Here’s a guaranteed way to pay off credit card debt and minimize the amount of money you shell out to credit card companies.
How to Pay Off Your Credit Cards Painlessly
Do you have more than one card? Are you carrying balances on the cards month to month? Are you paying a fixed amount each month towards paying off each of your cards? If you answered these questions, yes and you want to slash down the interest money you’re giving away to the credit card companies. The quickest way to getting rid of your debt is to do two things.
First, pay the minimum monthly payment on each card. Secondly, use all the money left over to pay down the card with the highest interest rate. It sounds simple but most people don’t pay their cards this way.
An English study checked out 1.4 million individual credit card holders. They focused on people with more than one credit card and revolving balances (folks who carry over a balance from month to month). This means they have to figure out the best way to divide up their card payments
Hmm! Do I make payments based on interest rates? Or do I try to pay off the one with the highest balance first? The lowest balance? Or maybe base it on something else? Stop racking your brain. The best strategy is actually super easy to do.
The Best Way to Pay Off Credit Cards
The cheapest and best way to pay off several cards is to first pay the minimum payment on the cards with the lowest interest rate.
Next pay as much as your wallet or purse can stand on the card with the highest interest.
Only pay more on the low-interest rate cards if you’re able to pay off the high-interest rate card in full.
The English study found out the cardholders were doing something else. Although, cardholders should apply all the money over the minimum payment to the card with the highest interest; in real life, they were only using 51.5% of their excess payments to pay on the high APR card. Ouch!!!
Many, in fact, most of the people didn’t take the interest rates into consideration when deciding how to split up their payments. The study discovered that only 10 % of debtors were spending all of their extra money paying off the high-interest card.
Quit Throwing Away Money
Meanwhile, back in the good ole, U.S. of A. most households have at least one credit card. And if you have one card… I’ll bet you a dollar to a donut that you’ve got two.
Don’t be like our cousins across the pond.
The U.K. study showed that they are blowing hundreds maybe thousands of dollars in interest payments every year. Give yourself raise. See you later.