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This will help you start the new year off right.
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Most people don’t start working on their New Year’s resolutions until January, but if you want to give yourself the best chance of success, it doesn’t hurt to lay some groundwork right now. That’s especially true if you hope to accomplish a big goal, like paying off credit card debt, in 2023.
Here are three helpful moves you can make right now so you’ll be ready to dive right into debt repayment when we finally ring in the new year.
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1. Take stock of where you are
Start by making note of all the cards you’re currently carrying a balance on. Record the following information for each one:
The current balanceThe minimum paymentThe payment due dateThe annual percentage rate (APR)
If you expect to charge more to the card in the coming weeks, make a note of this as well so you can double-check the balance in the new year.
You can use this information to prioritize which cards you want to pay off first if you don’t plan to take out a personal loan or open a balance transfer card. Generally, it’s most cost-efficient to pay the minimum balance on each card and then put any extra money on the card with the highest APR first until it’s paid off. Then, you move all your extra cash to the card with the next-highest APR, and so on. This is known as the debt avalanche method.
2. Scope out balance transfer card and personal loan offers
Balance transfer cards and personal loans can both be excellent tools to help you get out of credit card debt, but you need to understand exactly what you’re getting. Balance transfer cards enable you to transfer your balance from one or more credit cards to a new card and there’s usually a 0% introductory APR period that could last anywhere from a few months to a couple of years. During that time, your balance won’t grow at all, making debt repayment easier.
But balance transfer cards charge fees, which raises your total balance slightly. And you’ll start accruing interest on the remaining balance as soon as the 0% APR period is up. You also can’t open a balance transfer card with an issuer you’re already indebted to. You must choose a card with an issuer you don’t currently work with if you want to do a balance transfer.
Personal loans give you a predictable monthly payment and they don’t require any collateral. You don’t always need great credit, but you could still pay quite a bit in interest with one of these loans. And they may have some upfront fees too.
It’s best to compare a few balance transfer cards and personal loans side by side to see which has the fewest fees and the most generous terms. Even if you’re not ready to open one yet, doing this research in advance will make things a lot smoother for you when you are ready to take that next step.
3. Create a new budget
Ultimately, you need to be able to find some extra cash in your budget if you hope to pay down your debt. But that’s not easy for a lot of people. You can look through your existing budget for opportunities to reduce spending, like canceling subscriptions you’re not using or limiting discretionary purchases. But sometimes, this isn’t enough.
In that case, you may want to look for ways to increase your income so you can bring some extra money in for debt repayment. You may be able to negotiate a raise or find a better-paying position with a different company. You could also try starting a side hustle if you have a little free time. Put any extra cash you earn toward your debt repayment first. When it’s paid off, you can think about diverting some of that money to savings or to buy yourself something nice.
Paying off credit card debt is a challenging task, but if you break it down into these smaller steps, it can feel a little more manageable. Just take things one day at a time and do the best you can. Even if you don’t manage to pay it all off in 2023, making the moves above could get you a little closer to financial freedom.
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