Last Updated on September 22, 2021 by Henry John
It feels like free money until you realize that you have to pay back with compounding interest. I have the same feeling when I spend money using credit cards (high-interest debts). And quite frankly some of the things I spend that money on were STUPID things.
You go on a foolish spending spree powered by your credit cards and before you realize it, you are heavily in debt and not just any debt but CREDIT CARD DEBT.
Credit card debts are one of the worst kinds of debts to have because of their typically high-interest rates. With credit card debts, the faster you pay off the less you pay on interest.
Normally, no financially wise person would want to take on huge credit card debts, however, there are many reasons why people take on huge debts on their credit cards. Some reasons are good, and mostly, they are dumb.
Nonetheless, we all got to pay back, and paying as fast as possible will see us pay less in interest and gain some financial freedom. Believe it or not, a borrower is a slave to the lender. I’ve been there.
There are debts that can deprive a person of a good night’s sleep and peace of mind, and certainly, huge credit card debts are one of them.
If you are having an unsecured financial life as a result of your credit card debts, here are 9 tips that helped me pay off my credit card debts:
1. Prioritize: Put debt repayment at the top
When you reach the conscious conclusion that you need to pay off your credit card debts aggressively, then, it has to be a top priority because you concluded that it matters.
In the words of the famed German literary figure, Johann Wolfgang von Goethe, “Things which matter most must never be at the mercy of things which matter least”.
Your monthly budget has to reflect your priorities, and this may entail that you cut back on things that matter less and reallocate their money or a portion of it towards repaying your debts.
It is not enough to say “I want to pay off my credit card debts aggressively”, you’ve got to show it by the way you live and spend: PRIORITIZE PAYING OFF YOUR DEBTS.
2. Don’t take on New Debts
If you want to pay off your debts fast, it’s only common sense to stop taking on new debts. COMMON SENSE might be called common but it’s not easy to follow through.
Month after month I would tell my partner that I want us to focus on paying off our credit card debts aggressively, only to end up being in more debt the next month.
I know the temptation of taking on new debts while you are trying to pay off your existing debts, especially if you have an impressive credit score like I do.
At some point, we decided that enough is enough, we don’t want to be in bed with credit card companies anymore. We made sure not to overstretch our budget and risk having to take on new debts.
If you find yourself needing to take on new debts as you seek to pay off your old debts, try to see if your budget can address that tendency.
And there is something that’s called debt consolidation. It’s a process that combines all your debts into a single payment.
It mostly involves getting a fixed-rate loan to pay off all your existing debts at a go.
Generally, it is not a wise idea to use debt to pay off your debt. A lot of people have gotten into more debt trying to CONSOLIDATE their debts.
Whatever the case may be, you should try as much as possible to avoid taking on new debts. Can’t stress that enough!
3. Stretch your Budget as thin as feasible
You gotta punish yourself for being a bad boy or a bad girl, financially, all this while. That’s how I personally justified being extremely frugal in order to free up more cash and allocate them towards my debt repayment.
You may not necessarily have to be extremely frugal, however, you need more of your income to be allocated towards your debt repayment. The more money you allocate the faster you can pay off.
Study your budget and find out the things you can do without for the time being, then, slash them out.
And if you don’t live on a budget, it’s past time you do. BUDGET UP ASAP, it may very well be why you have unjustifiable credit card debts.
4. Choose a suitable pay-off plan(s)
Now we get to the interesting part. This is the part where you decide on EXACTLY how you are going to pay off your debts.
Basically, there are two types of debt repayment plan that I recommend, each have its pros and cons, all you got to do is choose the model that suits your personality and situation the most.
Here are the two major debt repayment plan:
1. Pay-off the most expensive debts first (debt avalanche)
From a theoretical standpoint, the debt avalanche method of debt repayment is one of the fastest and cheapest.
It basically involves paying the minimum on ALL credit cards and making extra payments on the most expensive debt using the remaining repayment funds.
Let’s say your total credit card debt is $10,000 spread across three different cards. And their balances are $6,000 at 15% interest, $1,500 at 20% interest, and $2500 at 17% interest for Card A, B, and C respectively.
Which card do you think have the most expensive debt?
It’s definitely not Card A, it’s Card B because, at 20%, it is the card with the highest interest rate.
Now you get it. It’s all about interest rates.
The card with the highest interest rate is the most expensive debt, that is the one you want to pay off first. When you finish paying it off, refocus on paying off the next expensive.
REPEAT THE PROCESS UNTIL YOU ARE DEBT FREE.
2. Alternatively, pay off smaller debts first (debt snowball)
One of the major downsides of the debt avalanche is the likelihood that the debt with the highest interest rate may be the one with the highest balance.
This entails that it’s going to take a lot of time to pay off the first debt.
Month after month of repayment, you may feel like you are not making any progress, especially if the balance is significantly big compared to the rest.
And that feeling that you are not making any progress may cause you to doubt the process and even abandon your repayment plan completely.
I suppose that’s not a situation you want to be in.
Worry not, the debt snowball method has your back. This method of debt repayment says “forget the interest rate”.
Just starting by paying off the debt with the LEAST balance.
Because by doing so, you are going to build something called MOMENTUM. Momentum is a very powerful force that every debtor needs to pay off their debts aggressively.
Month after month of adopting this method, you are easily going to feel that you are making progress.
Because you are starting with the card that has the lowest balance, it won’t take much time to knock off the first debt.
And that feeling of progress is going to give you more strength to continue trusting the process.
The debt snowball method is the method that Dave Ramsey recommends, it works for a lot of people and it may be not the fastest theoretically, but it works.
Ramsey Solutions list four simple steps to use the debt snowball method for your debt repayment:
Step 1: List your debts from smallest to largest regardless of interest rate.
Step 2: Make minimum payments on all your debts except the smallest.
Step 3: Pay as much as possible on your smallest debt.
Step 4: Repeat until each debt is paid in full.
Personally, I adopted the debt avalanche method because I know that it will save me from paying more money on interest and it’s the fastest way to pay off my debt.
And as long as my total balance reduces month after month, I know that I’m making progress. But that’s what works for me, it’s doesn’t necessarily mean that I will suit you.
Choose the method that suits you, CHOOSE YOU.
5. Remove your credit card details from online subscription platforms
This was one of the first things I did because I subscribe a lot. I went through my account statements, highlighted all the debits from every website that I committed to making subscription payments.
Then I deleted my credit card details from their websites, ‘no more I said. Haha! I only took pity on a few work/business-related subscriptions.
Go through your account statements, you may be surprised to find some $10 monthly deductions from websites you no longer use or need.
You’d be able to save yourself some money by deleting your credit card details from some of these online subscription platforms.
6. Increase credit card monthly payments
Let’s assume you have a balance of $10,000 on a credit card with 17% interest and expected to make a minimum monthly payment of $200.
If you make only the minimum payments it will take you 7 years and 4 months to pay off the debt and you will end up paying an additional $7,500 in interest.
However, let’s say you pay double the minimum ($400), it will take 2 years and 8 months to pay off the debt and you will pay $2,400 in interest.
And if you pay three times the minimum ($600), it will take a year and 8 months to pay off the debt, paying just $1,500 in interest.
Therefore, increasing your monthly payment significantly will see you pay off your debts faster while also paying less interest.
You want to pay off your credit card debts fast/aggressively? Make more monthly payments, the more the faster.
7. Generate more income (side hustles)
This might not be for everyone, however, if you can generate some extra income from side hustles, it will really help you pay off your debts faster.
The income I generate from this blog helped me significantly to pay off my debts. And there are many side hustles you can engage in.
If you are interested check out this article about 50 profitable side hustle ideas on entrepreneur.com
8. Stay Committed
Finally, stay committed.
Trust and stick to the process.
I leave you with the words of Ken Blanchard “There’s a difference between interest and commitment. When you’re interested in doing something, you do it only when it’s convenient. When you’re committed to something, you accept no excuses, only results”.