“I’m drowning in debt.”
“My credit card bills are more than what I earn.”
“I lost my job. How can I handle my credit card payment now?”
These questions get raised when credit card bills stack up.
You might not even be in debt now but the danger may be lurking in front of you.
It is a scary situation but you can fix it before it gets too late.
Yes, You Can Lower Your Payments
First off, don’t ever think that filing for bankruptcy is your only way out.
Don’t fret because there are ways you can lower your credit card payment.
As a matter of fact, there are 10 ways you can do this.
Pay Your Balances in Full
Only 35% of credit card owners pay their balances in full. This means they don’t have any remaining balances carrying over to the next month.
This is how you should use a credit card.
People who practice this habit use a credit card only for convenience.
We’ll tackle that bit a little down below. Right now, you have to focus on one key aspect: paying your balances in full without letting it roll over.
The obvious benefit is that you don’t gain new bills the next month. Nothing rolls over and there are no interests to pay.
If you’re not drowning in debt you can practice this a little:
Use your credit only to pay for small items like toothpaste a cup of coffee.
When you get online, pay off your credit balance immediately.
Don’t let the day pass without paying your balance.
Don’t use your credit card for transactions more than $50. This makes sure you can pay the balance within the same day.
Make Bigger Payments
This can sound counterproductive but it helps in the long run. Paying more now means you’ll have lower interest balances to pay in the future.
You might be thinking: how does paying more lower my credit card payments?
Let’s paint an example for you.
Say you have a credit of $2,000 charged to your card. For this example let’s say that the APR is set to 14%.
If you pay the minimum, you’ll have to pay an added interest of $1,833.24.
Now look at the benefits of paying more:
If you instead pay $100 per month and you don’t add additional charges to your card, your interest amounts to $290.77.
Did you know that interest builds on a daily basis? Here’s how this works:
Let’s say you bought lunch using your credit card. If you don’t pay off the balance that same day then the interest for it will grow the next day. It will continue to grow on a daily basis until you pay it off.
This means you should handle your credit card payment on a daily basis. Pay off the bills you can afford before their rates get too high.
If you can, don’t settle to pay only the minimum balance each month. The leftover balance rolls over to the next month with accumulated interest.
Pay more and pay early to cut down on the total time needed to pay the balance. This quickly reduces your credit card payment and interest.
There is the chance that your creditor has a credit card with a better deal for you.
The interest rates might be lower or the penalties for a late credit card payment could be less severe.
You can ask to transfer your balances to a card with lower rates. Do this with caution because there is one aspect you have to keep an eye on.
When you transfer your balances you have to pay off the credit bills while the introductory low-interest rate is still active. Once this expires, your interest rate can climb higher than it was in your previous account.
This introductory period differs from creditor to creditor and from card to card. In general, it lasts between 12 and 18 months.
You’ll have to pay your credit bills within that window of time.
Cut Down on Credit Card Use
To lower your credit card payment, reduce your credit card use.
That might sound like common sense but there is science behind it.
Credits cards encourage impulse shopping and you can prevent this by using cash or a debit card instead.
If possible, stop using your credit card at all. Focus only on your credit card payment and use cash for all future transactions.
This means using a credit card for only two occasions: when it’s necessary or when it’s convenient.
A credit card is necessary when you don’t have cash on you at the moment for a transaction. It is convenient when you only use it to buy small, affordable items that you can pay off as soon as you get home and online.
Using cash instead of a credit card will prevent you from spending over your budget. Some people see a credit card as a gateway to borrowing more than they can afford.
With cash, people are more inclined to think twice before spending.
Cautiously Consider Debt Consolidation
A peer-to-peer lender can help but you have to approach this method with caution. You’re taking a loan to pay off a different loan.
If you have a long-term job and a decent credit score you can find a solution here. It is possible to get a debt consolidation loan that is 20-30% lower than some credit cards.
With a debt consolidation loan, you can pay off credit card bills approximately up to $5,000. Some lenders will even give more depending on your credit score.
There are also bad credit score loans. These loans don’t ask for a collateral and there is no minimum credit score requirement.
With this type of loan, you’ll shave down the interest rates on your credit card payment.
Keep in mind you don’t have to apply for a consolidation loan. If your credit card bills aren’t too high you can use the same tactic with a personal loan.
Negotiate Lower Interest Rates
Sometimes all it takes is a quick call. You can ask to speak with a representative who can work on lowering the interest rate on your credit card payment.
LowCards CEO Bill Hardekopf even suggests asking for a price match. If a competitor can offer you a lower interest rate, your creditor might have the inclination to match it.
This will guarantee you don’t transfer to their competitors.
If you can’t negotiate lower interest rates there is still one other option. You can work out a payment plan.
Call the Creditor for a Payment Plan
A payment plan is often done as a last resort without filing for bankruptcy.
When speaking with the representative, you’ll have to present your whole financial status.
This means showing every detail regarding your income and a breakdown of your essential expenses.
This breakdown includes your mortgages, insurances, a budget for food, schooling, and a budget for kids. Some creditors will include your expenses for pets to help decrease your payment even further.
When this is all done, you’ll have a consolidated debt to pay. It will have a lower interest rate compared to your previous monthly credit card payment.
One caveat is that most creditors will likely close your account until you pay off the debt in full.
Start With the Oldest Card
Creditors value loyal customers. Take advantage of this. Returning long-term customers lead to higher profits, after all.
When you have multiple cards to deal with, start with the oldest one you have. You can point out that you’ve been a customer for a long time.
This is the creditor that is more likely going to negotiate a decent payment plan.
Your oldest card is also likely to have the highest credit limit. The sooner you can pay it off, the sooner you can use it again for emergencies.
Prioritize Your Payments
Take a moment and jot down all your payments and income on a sheet of paper.
The math surrounding credit card bills are hard to wrap our heads around so a visual representation will go a long way.
We plan things better when they have a visual aid.
With this aid, you can see which expenses you can cut down on and which ones to prioritize.
Make sure to allocate your budget to cover the minimum credit card payment for all your cards. Focus your budget on the card with the highest interest rate and the oldest one in your possession.
Solve Your Credit Card Payment Now
Don’t wait to solve your credit card payment. The longer you wait, the higher your bills will go.
It should come without saying that you need to improve your credit score. Solving your credit card payment will help you achieve that goal.
We can help you find solutions or get a loan to pay off your credit card bills.
Not sure where to start and what to prioritize?
Do you need someone to talk to for guidance and to build a solid payment plan before talking to your creditor?
Contact us and we’ll get you on the right track.