Ideally you should pay off all of your credit card debt right now. Realistically, it may not be financially possible for you to do so at this time. In that case, the best thing you can do is pay off as much as you can every month to keep decreasing the debt. This article will answer questions relating to paying off credit card debt.
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The best answer as to when you should pay off credit card debt is as soon as possible. You may have found an online credit card that sounded great and you haven’t been able to pay if off. There are many benefits to paying off your debt quickly and many negatives if you don’t.
What are the negatives to holding off paying your credit card debt?
The three biggest things that are affected by you waiting to pay off your credit cards are the interest, your credit score, and cash flow.
One of the worst things you can do in regards to paying your credit cards is to just pay the minimum balance due. Every credit card charges an interest fee, known as the APR, when you don’t pay off your balance every month. In reality, when you pay the minimum fee a majority of that amount is interest built up, rather than the principal balance, which means that you are not lowering much of the original amount that you owe.
The extra money that you pay every month goes into the pockets of your credit card companies rather than helping you out. If you were able to pay off the balance of your card, or at least more than just the minimum, you would be able to spend the money you saved on a number of other things that would be beneficial to you.
Another thing that is affected by you having credit card debt is your credit score. A factor in determining your score is how much debt you have compared to assets. If you have a high credit card debt, your credit score will ultimately be lower. You want to keep your balances low as well as pay your bill on time.
Finally, if you are carrying credit card debt and are spending money on the interest charged by the credit card companies, you have less cash to spend on things that you want or need. Your financial outlook is a lot brighter if you have more cash and don’t have to spend it on paying your credit card debt.
What if I want to save the extra money instead of paying more on my credit card bill?
Saving money and having a separate account for emergencies and a down payment for a house is very important. However, your financial situation would be a lot better if you focused on paying off your credit card debt first. The interest rate on your credit card is going to be a lot higher than the interest you would get from your money being in a savings account.
Once you pay off your credit cards, then it would be a smart idea to put that extra money away in savings. For more tips on being financially responsible, check out the My Money site.
What if I don’t have enough money to pay off all of my credit card debt right now?
If you can’t come up with enough money or if doing so would put a big financial strain on you, that’s OK. You can still come up with a plan to diligently pay off your credit card debt over time.
There are two big points in regards to paying off credit card debt. One is to pay as much as you can over the minimum due, as you are able to, even if this means giving up some things that are not necessities. The second is to focus on paying the debt of your highest interest credit card first.
You can find more tips on paying down your credit card debt on Suze Orman’s website.
What do I do after I have fully paid off one of my credit cards?
First of all, congratulate yourself! That is a great feat that takes responsibility and dedication. Secondly, cut up that credit card so you don’t use it again. However, don’t close the card right away. If you leave it open, it will look like you have a lower debt ratio which will help increase your credit score.
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