Most people don’t start working on their New Year’s resolutions until January, but if you want to maximize your chances of success, there’s no harm in laying the groundwork now. This is especially true if you want to reach a big goal, like paying off your credit card debt by 2023.
Here are three helpful moves you can take right now so you’re ready to start paying off your debts as soon as the new year hits.
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1. Know your location
Start by writing down all the cards you currently have a balance on. For each, record the following information:
If you plan to charge your card more in the coming weeks, make a note of this as well so you can double check your balance for the new year.
You can use this information to prioritize which cards to pay off first if you don’t plan to take out a personal loan or open a balance transfer card. In general, it is most cost-effective to pay the minimum balance on each card, then put extra money on his highest APR card first until the payment is completed. Then move all excess cash to the card with the next highest APR. This is known as the Debt Avalanche Act.
2. Research balance transfer cards and personal loan offers
Both balance transfer cards and personal loans are great tools to help you get out of credit card debt, but you need to understand exactly what you’re getting. A balance transfer card allows you to transfer balances from one or more credit cards to a new card. There is typically a 0% introductory APR period lasting months to years. During that time, your balance will not increase at all, making it easier for you to pay off your debt.
However, there is a fee for balance transfer cards, which slightly increases your total balance. And as soon as the 0% APR period ends, interest will start accruing on the remaining balance. Also, you can’t open a balance transfer card with an issuer that has already taken care of you. When performing a balance transfer, you must select a card from an issuer that is not currently affiliated.
Personal loans offer predictable monthly payments and require no collateral. You don’t always need a lot of credit, but you can pay a good amount of interest on one of these loans. There may also be an upfront fee.
We recommend doing a side-by-side comparison of several balance transfer cards and personal loans to see which has the lowest fees and most generous terms. Doing this research in will make things run smoother when you’re ready to take the next step.
3. Create a new budget
Ultimately, if you want to pay off your debt, you need to be able to find some extra cash within your budget. You can examine your existing budget for opportunities to reduce spending, such as canceling unused subscriptions or limiting any purchases. However, this may not be enough.
In that case, you can look for ways to increase your income and bring in extra money for debt repayment. You may be able to negotiate a raise or find a higher paying position at another company. If you have a little time, you can also try to start doing side hustle. Use the extra cash you earn to pay off your debt first. Once you’ve paid it off, you can consider putting some of that money into savings or buying something nice.
Paying off credit card debt can be a daunting task, but breaking it down into these small steps can make it a little more manageable. Even if you can’t pay it all off in 2023, making the moves above can get you a little closer to financial freedom.
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