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Explained: How to Reduce Your Credit Card Debt in 2021

Reducing credit card debt frees up your hard-earned money for other important things, from food and medicine to entertainment. If you're struggling because of a credit card balance, these tips will help you fill in that financial hole.

 

Know where your finances stand.

How much debt do you have currently? How much cash do you need every month to pay bills? What can you eliminate or reduce (entertainment, for example)? The more money you can put toward paying off current debt the better, but you have to know where you are financially before you can figure out how to make that happen.

 

Stop Charging Everything!

This one may seem like a no-brainer, but the first thing you should do to eliminate credit card debt is to stop charging every purchase. It is easy to get caught up in the cycle of making payments only to start charging again, but that is only going to hurt your finances and cause you to pay more in interest if you are unable to make the minimum monthly payment. It is much more difficult to pay off a credit card when you keep racking up charges. For now, save your credit card for emergencies and use your debit card or cash as often as possible.

 

Set goals so you can stay focused.

Large and small goals can keep you motivated and focused on what you're trying to accomplish. You also can build in rewards at certain levels. For example, if you want a new TV, make that a reward somewhere along the way.

 

Ask for a better interest rate.

Be aware of your current interest rate. Depending on your balance and other variables, lowering your interest rate can save you hundreds of dollars a year. Also, take note of your annual fee and if there are any options to waive or reduce it.

 

Consider making more than the minimum monthly payment.

Depending on your balance and interest rate, paying only the monthly minimum may actually put you deeper in debt. Tightening your belt in other areas—not going out to eat as often, for example—and putting that money toward the credit card debt can make a huge difference in a few months.

If you have more than one card, consider putting as much money as possible toward the one with the highest balance or interest rate—the one that's hitting your budget the hardest. Sometimes, paying the minimum on the other cards while you bring that one down to a zero balance is the best strategy.

 

Pay your credit card statement on time.

This avoids late payment fees and possibly higher interest rates. If you don't know when your payments are due, use your e-calendar or a reminder app to be certain that you do not miss those important payments. Or set up a direct debit or standing order so the payment is made automatically on the same day each month.

 

Plan ahead for emergencies.

Sometimes a major life event wrecks the best plans. However, if you have money in savings to replace, say, a dead water heater, you don't have to pay for the new one over the next several months or longer. There's no interest when you pay cash!

 

Use a 0% Balance Transfer Offer

If you are disciplined and detail oriented, a 0% balance transfer offer could be a painless way to pay down your credit card debt. You will need to know when the 0% teaser rate will expire, and you will need to be disciplined about paying off the balance before that day arrives.

Keep a close eye on your mailbox and watch out for the next 0% balance transfer offer. This simple strategy could save you hundreds of dollars in interest while allowing you to banish your credit card debt once and for all.