Paying off high-interest credit card debt is one of the best things you can do for your finances. When you have high-interest debt, too much of your money is going straight into someone else's bank account. The best thing you can do is to reduce your debt as quickly as possible, and start putting that money to work for you.
If you are trying to figure out what you can do to pay off debt, here are 4 suggestions for paying off debt:
1. Pay More than the Minimum
It will take you forever to pay down your debt if you only pay the minimum. This is because a large part of your minimum payment actually goes right to interest. The key to reducing your debt quicker is paying down the principal. Look at where you can find room in your budget, and then pay more than the minimum.
If you have multiple cards, focus on one card at a time, while you pay the minimum on the others. This can help you boost your efforts as you pay off your debt.
To really improve your results, negotiate with your credit card issuer. In some cases, you might be able to get a rate reduction, which can help you put more toward your principle and boost your ability to pay down debt.
2. Liquidate Your Savings Account
This is a tricky one to decide on. On the one hand, you want an emergency fund to help you deal with unexpected expenses. On the other hand, you are lucky if the money is earning 1% while your credit card interest rate is probably more than 18%. That's a big disparity. It's like getting a risk-free return if you just pay off your debt with a portion of your savings. But it's important to be careful as you do this. Perhaps you shouldn't deplete your account completely in order to make this work, keeping a small fund just in case. Carefully consider your options and weigh the risks as you determine whether or not you want to do this.
3. Increase Your Income
While you can cut back and use the money you save to reduce your debt, you will likely do even better if you can increase your income. Look for ways to earn a little more money. This might include getting a part-time job, or starting some sort of side gig. In some cases, you might be able to earn a little bit more with the help of a raise at work.
Find ways to increase your income, and then put all of that toward paying down your debt. The more you can make, the faster you will be rid of your high-interest debt.
4. Consider Bankruptcy as a Last Resort
There are some cases where you run out of options. If you have done whatever you can to pay off your debt, and if it keeps piling up, or if you have had a major financial catastrophe like a job loss or a medical emergency, you might consider bankruptcy as a last resort. This will impact your credit score quite a bit, however, and you might find other issues associated with bankruptcy. But it is an option if you feel like you have no other recourse.