Crack Your Credit Card Debt Cycle

Posted on: 12 Nov 2019

An easy guide to freedom from credit card debt Paying off credit card debt can seem like an insurmountable task. You seem to be making headway on that dratted balance and then, before you know it, your fridge dies or it’s Christmas time again and that balance starts to creep back up there again. If this sounds like you and you want to break out of this endless cycle, there are steps you can take to get those cards paid off so you can breathe again. Like anything, with a bit of simple planning and discipline, it is completely possible to pay your cards off. Making your plan clear and achievable is going to sure up your success so let’s talk about what you can do.

Your first step is to come up with a plan. A credit card payoff plan is a step-by-step approach to paying off your credit card debt. You can create a credit card payoff plan one of three ways; on your own, using a credit card payoff calculator/app, or with help from professionals. This article will show you how to create a credit card payoff plan using all three options.

Creating Your Own Credit Card Payoff Plan

Developing a credit card payoff plan can be tough if you don’t know where to start. To make it easier, we’ve broken it down into steps. Here’s how to create a credit card payoff plan when you are doing it yourself.

1. What’s Your Grand Total?

This part is easy enough. Using your last bill and your banking apps work out the total balance owing on all of your cards as a combined amount. Accuracy is important here so don’t be scared of your final number. You need to know what total you are working with in order to come up with the right payoff plan.

2. Set a Date and Calculate Your Amended Monthly Payments

What is a realistic time frame for you to pay off your total? Do you want to be free of your credit card debt in 1 year? 2 years? 5 years? Set yourself a realistic time frame to pay your debt off and when you have, you can work out your monthly repayments. Let’s say you want to pay your cards off in a year; you take your grand total and divide it by 12. Those will be your approximate monthly repayments for the year. Don’t forget, due to interest charges and bank fees, you may be left with a small balance to pay at the end

3. Keep it Realistic

If you have done your calculations, and you can see that budget-wise, you will struggle with that level of repayment, then adjust your expectations and set a new date. Keep adjusting your date and repayments until you find a workable amount that is sustainable. Yes, it may take you longer than you’d like to pay the cards off but the goal here is to be realistic about what you can manage with consistency.

4. Just Do It!

Now comes the part where you roll up your sleeves and engage your discipline and do the darn thing! Out with all the counterproductive behaviour (paying one card with another, taking on new debt or excessive spending) and in with sticking to the plan! Don’t panic if you slip though. Much like falling off the wagon when you are on a diet, if you deviate from the plan, don’t give up! Get yourself back on track (adjusting your plan if need be) and continue to stick to the goals that you have set.

5. Sacrifice Your Windfalls

If during the time you are paying your cards off, you happen to come by extra cash (bonuses, overtime, tax returns, etc.), putting it into paying your cards off will speed you towards your goal much faster.

6. Be Budget Wise!

Credit cards carry interest and it is interest that is the true killer. If you have access to money that can be released from investments, your mortgage or securities, consider doing this as better use of your money. The sooner your cards are paid off, the sooner you stop pay interest on them and your money becomes freed up to invest how you see fit.

7. Consider Alternative Approaches

If you aren’t able to pay a consistent amount each month according to your plan, there are other ways to get out of debt on your own, like the “debt avalanche” or “debt snowball” methods. Each of these payment options has their advantages and disadvantages but they allow a little more flexibility than a set monthly amount. The “avalanche” method focusses more on the interest of each credit card and has the potential to save you time and money BUT, it is the more difficult of the two methods. The “snowball” method ignores the interest rates and focusses on the balances of each card, starting with the smallest amount first. This method will cost you a little more time and a little more money but is much more achievable of the two methods, simply because the “wins” will feel like they come sooner.

Creating a Credit Card Payoff Plan Using a Calculator/App

How amazing are online calculators? We are extraordinarily lucky to have access to the information we do and the credit card pay-off calculators that are around now are great! Websites like Credit Karma have debt calculators where you can enter your information and find out how long it will take you to pay off a debt. This is such a useful tool as you can continue to adjust your numbers to work out a payment amount that works for you and your budget.

While these calculators do factor in your current debt and minimum payments, they don’t always tell you how to create a credit card payoff plan. That’s where debt payoff apps may be helpful. Apps like Debt Payoff Planner can actually set you up with a plan to get out of debt faster. A debt payoff app can help you track your payments and gives you visual measures of how you are going. These apps allow you to keep all your debts in one place, easily track your progress and even send you alerts when it’s time to pay your bills. Instead of just doing it on your own, a debt payoff app will walk you through what you need to do in order to become debt-free. It still requires discipline and hard to maintain your momentum but for some people, the accountability of an app is all it takes to help them stick to their plan.

Cutting Your Credit Card Debt with a Credit Specialist

Which brings us to the final option; bringing in the big guns. A Credit Mediation Specialist could be the solution to your debt problems. These guys’ sole job is to reduce your debt as fast as possible. Using their existing relationships with lenders and their knowledge of the financial industry, they will look at your total debt and your current financial situation to ascertain how they can get your debts cut by up to half. Many of them offer a “no win, no pay policy” which makes them a low-risk option. Using a credit mediation specialist will cost you but compared to the amount of debt you stand to be free of and the obvious savings in interest charges, it would be money wisely spent. If you have tried to stick to a budget in the past, with no success, it may be time to call a credit professional.

If you have a client struggling with debt, we may be able to help, contact us on 1300 490 030 or [email protected]

This article should not be considered legal advice, but as a general guide only. If you are facing legal recovery action, please consult a legal attorney to assist you. For further information on how to have your debts cut by half or more through a specialist negotiator, reach out to us on [email protected] or contact us on 1300 490 030.