10/7/2023 0 Comments Which bills should i pay off first![]() Take advantage of debt consolidation using something like a personal loan, which could offer a lower interest way to consolidate debt. There may be a fee to do the balance transfer or an annual fee on the cardĤ. Requires discipline to pay the card off before the intro period ends ![]() Pros and consĬan save you money by you not having to pay interest “Ideally, this card would also have no annual fee and would charge a $0 fee for balance transfers, however even a one-time fee of 3% to 5% of your existing balance to initiate a balance transfer could be much better than paying 20% or more in APR,” says Ewen. “There’s usually an upfront transfer fee of 3% to 5% of the amount being transferred, but it can still be well worth it,” says Rossman.īut doing a balance transfer may require a high credit score depending on the card, so it may not be an option for everyone. You can save hundreds of dollars if you have a few thousand dollars in credit card debt, because you aren’t being charged interest. ( See some of the best balance transfer cards of 2022 here.) To come up with a successful payment plan, given that you won’t have to pay interest, divide what you owe by the number of months in your 0% term and try to stick with that monthly payment plan so you can achieve a $0 balance by the time your regular APR kicks in. I suggest refraining from making any new purchases with the card, since the interest rate will skyrocket once the promotional period ends,” says Rossman. Taking advantage of a 0% balance transfer card involves opening a new credit card with an interest-free promotional term, and Ted Rossman, senior industry analyst at Bankrate, says this is his favorite debt payoff tactic because of how high interest rates are. “Once the promotion ends, the interest rate goes back up, so if you can, pay down your debt completely while it’s interest-free,” says Sara Rathner, personal finance expert at NerdWallet. With a balance transfer, you’re simply moving high-interest debt from one credit card to another that doesn’t charge interest for a set period of time, usually up to about 21 months. Do a balance transfer to a 0% APR card and aggressively pay that down. It can take time to make a dent in large balancesģ. You can lower how much you’re paying in interest ![]() You’ll save the most money by tackling your highest interest rate debts first Of course, you’re always paying the minimums on all your debts. Then you continue to do this until you’ve reached the bottom of your list of accounts. Once you’ve paid off the account with the largest balance, you put the same amount of money you were paying towards that debt to the account with the next highest interest rate. This is known as the “avalanche method,” and it’s the most advantageous from a dollars and cents perspective because you’re canceling out your highest-interest accounts sooner rather than later. Pay off high-interest debts first, while making minimum payments on the rest. You may pay more interest over time compared to paying the high-interest debt firstĢ. This method can help provide motivation to continue paying off debt You’ll likely notice progress quickly depending on how low your lowest balance is To do it, make a list of all your account balances in order of smallest to largest - and include the minimum payment amount for each - and allocate funds to pay the minimum amount due on all of your accounts except the one with the smallest balance.įor the account with the lowest balance, pay as much of the total due as you can until you’ve paid off all the debt and then continue to do the same thing with the account that’s next on your list. This is a strategy that’s commonly referred to as the “snowball method,” because it helps build up momentum to pay off debt. It can be motivating - and help you stay motivated on your debt payoff journey - to knock out your entire lowest-balance debt. Pay off the account with the lowest balance first, while continuing to pay the minimums on all other accounts. So which is the right strategy for you? It depends, and we talk to pros so they can help you pick the best strategy for you. ( See the lowest HELOC rates you may get now here.) Take out a home equity line of credit (HELOC) to provide a lower interest way to consolidate high-interest debt on other loans like credit cards. Pay more than the minimum on all your cards all the time. (S ee the lowest personal loan rates you may qualify for here.) Take advantage of debt consolidation, using something like a personal loan, which could offer a lower interest way to consolidate debt.
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