Tag Archives: Paying off credit card debt

Ways to Avoid and Fix Credit Card Debt

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At the beginning of 2023, the total of U.S. credit card debt remained at $986 billion, unchanged from the end of 2022 – according to a Federal Reserve Bank of New York report on household debt. In addition, credit card balances are up 20% from a year ago, according to a recent report from TransUnion. The average balance was found to have risen $5,733 over that same period. These figures are astonishing, however as inflation continues to rise – many consumers have turned to their credit cards to purchase items they feel they need to continue their standard of living. Continue reading to discover ways to avoid credit card debt, and if you’re currently in debt – how to fix it.

Avoiding Credit Card Debt

Know your numbers. Do you know what your Annual Percentage Rate (APR) is on the credit card you use most frequently? If you pay your balance off in full each month, this number might not make a difference to you – but if you carry a balance, you’ll want to make sure it’s on a credit card with as low of an APR as possible. This number determines the interest you’ll pay each month for carrying a balance. And the bigger the balance, the more you’re going to pay in interest. Credit unions have a maximum APR of 18% on all credit cards. Be sure to stop into your local credit union to inquire, or if you live, work, worship, volunteer or attend school in Monmouth or Ocean Counties in NJ – check out our four great consumer credit card options.* We’re sure there’s one out there for you!

You’ll also want to pay attention to if your credit card offers a grace period on payments, if there’s an annual fee associated with your card, what your monthly payment due date is, and if there are any additional fees. Note that late and annual fees can add a balance that you weren’t expecting, which can be worrisome if you’re already carrying a high balance that you’re having trouble paying.

Use your credit card as just that. Using your credit card for anything other than making occasional purchases within your budget, can cause you to rack up more debt from fees and other service charges. For example, using your credit card to make a cash advance, using your credit card at an ATM, or to make a balance transfer can end up costing you more in the long run. Taking a cash advance out of your card balance or using your credit card at an ATM for cash, typically come with higher interest rates on the cash advance and fees for using the service. While a balance transfer promotion offering a lower APR to transfer your balance from another higher rate card might seem attractive, if you don’t pay off that balance within the promotional period or make any new purchases on that card – you may be paying anything remaining after the promotion ends at an even higher interest rate (plus any initial balance transfer fees for using the service). The moral of the story here is – if you are going to use a credit card, use it for regular purchases only that you can afford to pay off within the current billing cycle (usually 30 days).

Avoid auto-saving your card online. If your credit card is saved online within a website you frequently shop, an app, or your mobile phone – delete it. If one-click impulse buying is a problem for you, manually having to get your credit card and type the numbers in for every purchase should really make you evaluate whether that purchase is worth it or not.

Don’t carry your card on you all the time. If you’re always reaching into your wallet for that certain credit card, leave it at home and only take it out when you absolutely need it. This will also stop impulse buying, and you’ll have to plan out your trip to the store you want to use the card at and can decide if you truly need and can afford the item(s).

Already in Credit Card Debt? Here are some ways to fix it:

Evaluate what and where you charge. Start with a monthly budget. You can’t pay off debt if you don’t actually know what’s coming in and going out each month. This will give you the real numbers you need to work with so you know how much you bring in on a monthly basis, and what bills you need to pay in that month with that income. Anything else that is not a necessity should be stopped until your credit card debt is paid off.

Make a plan for paying off your debt. The best approach here, especially if you have multiple credit cards to pay off – is tackling the one with the highest interest rate first. Pay this card all the way down and then move onto the card with the next highest interest rate until all are paid off. Do not charge any additional purchases to any credit cards during this payoff period.

Take out a personal loan from your credit union. Instead of continuing to rack up debt and pay more in interest on high rate credit cards, take out a lower rate personal or consolidation loan from your local credit union.** Use the loan to pay off all your credit card debt, don’t make any additional credit card purchases, and then tackle paying off that personal loan. You’ll pay off your debt at a much lower interest rate, and your credit score may even improve since you’ll be reducing your credit utilization at the same time.

Look for a long-term 0% balance transfer offer. While a short-term credit card balance transfer isn’t usually advisable, a longer term one which offers 0% on balance transfers for at least one year or longer – may work for you if you do it right. This means you will need to fully concentrate on paying off all your credit card debt within the balance transfer period. If that promotional period is 0% for 18 months, then all the debt you have transferred needs to be paid off by the end of that 18 months and no new charges – otherwise you risk adding on more interest at a higher rate for anything not paid off by the time the offer ends. This method requires strict planning and budgeting.

Open a high yield savings account. If you have any leftover funds at the end of each month in your budget, put them in a high yield savings account that will pay you some dividends for keeping your money in it. This will help you build a savings reserve and hopefully prevent you from accruing more debt while you’re trying to pay off your existing balance.

While credit cards can be a great financial tool and resource, it’s good practice to only use them as that. Always use a credit card in moderation, and avoid making tempting but unnecessary purchases on them. If you have questions about credit management or would like to make an appointment with one of our staff to help you with a game plan to pay off credit card debt – visit a local branch or call 732.312.1500.

*APR varies up to 18% for purchases, when you open your account based on your credit worthiness. The APR is 18% APR for balance transfers and cash advances. APRs will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fee. Other fees that apply: Cash advance fee of $10 or 3% of the total cash advance amount—whichever is greater (no maximum), Balance transfer fee of $10 or 3% of the balance—whichever is greater (no maximum), Late Payment Fee of $29, $10 Card Replacement Fee, and Returned Payment Fee of $29. A First Financial membership is required to obtain a Visa® Credit Card and is available to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

**APR = Annual Percentage Rate. Actual rate will vary based on creditworthiness and loan term. Subject to credit approval. Personal Loan repayment terms range from 12 to 60 months, and APRs range from 10.24% APR to 18% APR. Minimum loan amount is $500. Loan payment example: A $2,000 Personal Loan financed at 10.24% APR for 24 months, would have a monthly payment amount of $92.51. A First Financial Federal Credit Union membership is required to obtain a Personal Loan or Line of Credit, and is open to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. A $5 deposit in a base savings account is required for credit union membership prior to opening any other account/loan.

How to Pay Off Your Holiday Credit Card Debt in 3 Months or Less

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The holidays are a time for joy, family, giving … and racking up debt. More than a quarter of Americans have fallen into debt paying for holiday expenses — and it’s not a small amount of debt either. Overall, the average amount owed among those with holiday debt was more than $1,000. Of course, it’s easy to feel the pressure to spend during the holidays. But you don’t want to let overspending set you back financially in the new year. So if you ended up charging a little too much in 2018, here’s how to quickly pay off your holiday debt and start 2019 off on the right financial foot.

1. Figure Out How Much Debt You Have

To pay off your holiday debt quickly, you need to know what you’re dealing with. That means opening your credit card bills or checking your statements online. Add up all your balances to get a clear picture of how much holiday debt you have.

2. Develop the Right Debt Payoff Mindset

You might feel overwhelmed by how much you owe. But you can find the motivation to pay it off by focusing on the benefits of being debt free. Ask yourself why it is important to you to pay off your debt and what you’ll do with the extra money once your debt is paid. Having a specific goal will give you willpower to pay your debt off and not continue to charge. Maybe your goal is a vacation to Hawaii this summer. Print out a photo of your financial goal and keep it somewhere that you will be forced to look at it daily, and remind yourself that you’ll book the vacation once your holiday credit card debt is paid off and you start to save that money for your trip.

3. Create a Debt Payoff Plan

Another way to avoid feeling overwhelmed by your debt is breaking down the total you owe into manageable amounts. For example, if you have $1,000 of holiday debt and want to pay it off in three months, you’d need to make monthly payments of about $333. If you get paid twice a month, that’s about $166 per paycheck — or $11 a day. You could also make a chart showing how much you need to pay each week or month to eliminate your debt and track your progress.

4. Start as Soon as Possible

You don’t have to wait until you get your credit card bills to start making payments. The more frequently you make payments, the less interest you’ll end up paying and the more quickly you’ll be paid off. If you can, consider making weekly or biweekly payments.

5. Try Paying Off High-Rate Debt First

Focusing on your credit card or loan with the smallest balance first and making only minimum payments on other debt can help you feel a sense of accomplishment and build momentum to pay off bigger debt. However, you could actually pay off what you owe faster by prioritizing your debt with the highest interest rate.

6. Find Expenses You Can Temporarily Eliminate

To pay off your holiday debt quickly, take a look at what you might be able to live without for a few months. You could cancel some subscription services, eliminate lunches out and make coffee at home to free up extra cash for debt repayment.

7. Minimize Costs You Can’t Eliminate

You can’t eliminate all of your monthly expenses, but there are plenty you can reduce. For example, can you call and try to cut your phone or cable bill? Every little bit helps.

8. Make Extra Money for Debt Payments

After the hustle and bustle of the holidays, take time to go through your stuff to find things you no longer need that you can sell for cash. You can sell DVDs, books, clothing, tech items and unwanted gift cards online. You also could pick up a side hustle in your free time to bring in extra money for debt repayment.

9. Make Use of Credit Card Rewards

If you have cash back or rewards credit cards, consider putting them to use to help pay off your holiday debt.

10. Stick to Cash

If you want to pay off holiday debt quickly, you have to avoid racking up more debt. Allot yourself a certain amount of cash each week. Once it’s gone, it’s gone. Not only can using cash help reduce your reliance on credit, but also it might help reduce your overall spending.

11. Create an After-Action Plan

After paying off your holiday debt, you need to take steps to avoid racking up debt again next holiday season. Create a savings plan to have enough cash for the holidays in 2019. Just as you created a plan to pay off debt by breaking down what you owed into smaller payments, you can figure out what you need to save based on 2018 holiday spending. Then, divide that amount by the number of months left in the year until the holidays to know how much you need to set aside each month.

Article Source: Cameron Huddleston for Gobankingrates.com

3 Reasons Not to Pay Off Your Credit Cards Too Fast

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When it comes to getting rid of debt, it seems like the best option is to pay it off as quickly as possible. This is especially true of credit card debt. It’s high interest, so you should just pay off what you can, as quickly as you can, right? Not so fast.

It’s actually possible to pay off your credit cards too fast. Wait, what?! Here are three reasons to take a step back and evaluate whether or not you should pay off your credit cards immediately.

1. You Don’t Want to Completely Drain Your Emergency Fund

If you have a chunk of change in your emergency fund, it might be tempting to just take the lump sum and pay off your debt.

The problem with this though, is that you open yourself to financial vulnerability if an emergency crops up. You might have to turn to your newly-paid-off credit card. When that happens, you wind up back in debt, and you’ve got no emergency fund on top of it.

There’s a reason financial experts suggest you keep at least $1,000 in an emergency fund before you start paying off debt. That way, if something happens, you can cover it without going further into debt. Don’t deplete your emergency fund in an effort to get rid of debt right now.

2. Watch Out for Cutting into Your Regular Expenses

You feel rich on payday. You feel like you can put $500 toward debt, and it makes sense. Pay it off faster and win right?

Unfortunately, you might not actually have $500 to put toward that debt. What about your regular expenses, like groceries and insurance premiums? Have you looked ahead to the bills you will need to pay in two or three weeks?

Your debt payment needs to be based on your budget and grounded in the reality of your regular monthly expenses. If you aren’t looking at all your monthly expenses, and just throwing money at your credit cards without a plan, there’s a good chance that you will need to turn to those credit cards in order to get through the rest of the month.

That means you take a step back for every step forward. Instead of getting excited and putting a large amount toward debt when you get paid, make it a point to map out your budget. Look at your income and expenses. Then make a debt payment plan that calls for an extra debt payment based on the money you have available.

3. Don’t Put Your Future at Risk

Finally, it can be tempting to take a loan out from your retirement account in order to pay off your debt more quickly. However, that can be a bad idea as well. Even though you are “paying yourself interest” on the loan, the reality is that you can’t replace the time the money is out of the market.

Another potentially dire consequence is that you could suddenly end up needing to pay the whole retirement account loan back at once. For instance, the entire loan comes due within a few months if you lose your job. The amount becomes an early withdrawal if you can’t pay it back — subjecting it to penalty and taxes. That could put you in an even worse position.

Just because it seems like you should pay off your credit card debt quickly, doesn’t mean that you should be so extreme that you put your overall finances at greater risk. If you are looking to pay off your credit card debt, ensure you have a budget and financial plan in place so that your daily expenses and emergency fund are covered first.

Article Source: Miranda Marquit for moneyning.com

The 4 Fastest Ways to Pay Off Credit Card Debt

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There are many reasons why most of us decide to sign up for a credit card. Whether it’s to help boost your credit score or as a means of purchasing a more expensive item that you plan to pay off in increments, credit cards can be a smart option for your finances. Unfortunately, they can also be very detrimental to your budget if not used wisely or paid off in a timely manner. If you’re feeling stressed about your card balances – keep your head up and remember you can work your way out of debt! Here are four fast tips for effectively paying off your credit cards.

Cut them up.

This may sound like an obvious solution, but it is an enormously effective one. Stop the behavior that has gotten you in trouble in the first place and put an end to making charges once and for all. Moving forward, plan to only make purchases you can pay for right away and begin the process of working your way out of the debt you’ve created.

Pinpoint the problem.

What is it that you’ve had to use your cards to purchase? Clarity is key when it comes to your personal finances. Are you living out of your means and making high end purchases that you simply cannot afford? Are you making poor financial choices like eating out too much that you can easily rectify? Sit down, look at your credit card statements, and alter your lifestyle accordingly.

Compare interest rates.

If you owe on multiple cards, go back and review each one’s interest rates. Many people automatically assume that the card with the highest balance is the one to work on first, but this is a mistake. The high interest rates are what will get you in the end, so concentrating on those cards will have a greater impact on your finances.

First Financial’s Visa Credit Cards come fully loaded with higher credit lines, lower APRs, no annual fees, a 10-day grace period+, rewards, and so much more!* Click here to learn about our cards and apply online today.

Get a side job.

Sometimes, if your debt is going to take a significant amount of time to control, it’s best to look into other sources of income. There are often easy ways to make money on the side to get a few extra dollars in your pocket.

*APR varies up to 18% for purchases, when you open your account based on your credit worthiness. The APR is 18% APR for balance transfers and cash advances. APRs will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fee. Other fees that apply: Cash advance fee of $10 or 3% of the total cash advance amount—whichever is greater (no maximum), Balance transfer fee of $10 or 3% of the balance—whichever is greater (no maximum), Late Payment Fee of $29, $10 Card Replacement Fee, and Returned Payment Fee of $29. A First Financial membership is required to obtain a Visa® Credit Card and is available to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

+No late fee will be charged if payment is received within 10 days from the payment due date.

Article Source: Wendy Bignon for CUInsight.com