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It’s advice worth taking, and it’s easy to follow.
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There are so many different reasons why consumers wind up with credit card debt. For some, it’s a matter of overspending and not following a budget. But for others, it can be a matter of circumstances outside their control, like the loss of a job, unplanned home repairs, or medical debt.
Either way, if you have a credit card balance, you’re probably pretty eager to pay it off. And financial guru Ramit Sethi has some great advice for making that happen.
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Set your payoff date
When you owe money on a loan, it will often come with a specific payoff date. Credit card debt can be trickier because you’re not necessarily looking at a predetermined payoff date. But in a Business Insider interview, Sethi said the first question he likes to ask anyone with credit card debt is what date they plan to make the last payment on their balance. A person who has a payoff date in mind clearly has a plan, says Sethi.
If you don’t yet have a payoff date in mind for your credit card debt, that’s okay. But it may be time to establish one.
Think about how much you owe on your balance, and then figure out how much money, realistically, you can save each month by taking steps like cutting back on expenses and/or boosting your earnings with a second job. From there, you can figure out when you might be debt-free.
So, let’s say you owe $2,000 on your credit cards and you think you can conceivably free up $200 a month to go toward that debt. That means you could be debt-free in 10 months if you stick to that plan.
However, in that scenario, you might hit a snag for one reason — the $2,000 you owe only represents the principal amount you owe on your credit cards. It doesn’t account for interest you’ll keep accruing while you work on paying your debt off.
That said, if you have an end date in sight, and it’s not so far out, it could pay to move your balance(s) over to a new credit card with a 0% introductory APR. That will make it so you’re not accumulating interest on your debt as you pay it off.
Now, the downside of 0% introductory APR cards is that your intro period will usually be limited — sometimes to 12 months or less. But in this sort of scenario, that setup might work, because you might have your debt paid off before your introductory period comes to an end. And even if you’re looking at a payoff debt that’s further out, it still pays to get a reprieve from accumulating interest for a period of time.
Have a goal to work toward
Establishing a payoff date for your credit card debt could help you stay motivated and on target. So if you don’t have one in mind, run the numbers and come up with a payoff date that’s reasonable and realistic. It might be just the thing that helps you stay on track and gets you out of debt sooner.
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