How to Reduce Credit Card Debt Fast (6 Best Ways)

If you have high credit card balances in 2018, you need to prioritize paying them off and do it as soon as possible. That’s because credit card debt is now more expensive than ever, and if that’s not reason enough, here are a few more stats to fuel your desire to get out of debt.

1. Total revolving debt in the United States as of February 2018, which consists primarily of credit card debt, has reached $1.030 trillion, according to the latest Federal Reserve statistics. This is an all-time high for our country.

2. Interest rates have already risen twice in 2018 and the CME FedWatch tool is pointing to another rate hike by the end of this month.

You’re about to learn the top six ways to pay off high credit card debt, but before we dive in, let’s first look at the most expensive option you’ll want to avoid.

The most expensive credit card relief option

The most expensive way to get credit card relief is to only make minimum monthly payments. Never just make minimal monthly payments on credit cards as you end up paying the maximum amount in interest. For example, if you have a $15,000 Chase credit card balance and your interest rate is 29% when you only make minimum payments, you would end up paying a total of $45,408 in interest and it would take over ten years to pay off the balance.

1. Debt Snowball Method:

The debt snowball method of paying off your credit card balances has proven to be the most effective credit card debt relief option in 2018, according to a new study published by the Harvard Business Review.

With the debt snowball method, you pay off the credit card with the lowest balance first. Immediately after the initial credit card balance is paid off in full, your available monthly cash flow increases. They then use the additional funds to cash out the next smaller account. Once the second smallest account is paid in full, your available cash flow will continue to increase and keep growing, just like rolling a snowball. Next, use all that extra money to cash out the third smallest account.

This method works according to psychological principles. When a person achieves a goal, like paying off that first credit card debt, the brain releases dopamine and it feels good. And you want more of that good feeling, so you’re motivated to keep paying off each debt one at a time. Before you know it, you’ll see the light at the end of the tunnel and your swing will be at its peak, at which point nothing will stop you!

2. Debt avalanche method

The debt avalanche method focuses on attacking the account that is costing you the most money, which is the account with the highest interest rate. If you like math and numbers, you will most likely gravitate towards this route as it makes the most sense from a technical point of view.

Technically, this route will save you more money than the debt snowball method if you successfully stick to the plan.

There is much controversy about which way is more effective, the debt snowball or the avalanche method. Understand both options and then you can use your personality type to determine which route is best for your situation.

Some people may choose a combination of these two options. You could start with the debt snowball method and quickly pay off your smaller debts with a balance of $1,000 or less, and then switch to the debt avalanche method to pay off the rest of your balance in the most cost-effective way.

3. Balance Transfer Cards:

You can lower your credit card interest rates by using a balance transfer card that has no interest for 12-18 months. If during the introductory period you are able to pay your entire balance onto the balance transfer card at zero interest rate, you will eventually lose 100% of your interest and only have to pay the transfer card’s upfront fee.

Be sure to keep your credit cards open after you’ve paid them off, because closing a credit card lowers your credit score.

These cards come with prepayments that range from 3% to 5% of the balance.

Look for a balance transfer card that includes:

· Low upfront payments

· an 18-month introductory price

· an interest rate of zero percent

4. Home equity line of credit:

A home equity line of credit can be used to pay off high-interest credit card debt, saving you thousands of dollars in interest. Home equity loans are offered at lower interest rates than any other type of bank loan. BankRate.com estimates that the average interest rate on a home equity line of credit is just 5%.

The downside is that you are turning your unsecured debt into a secured debt and this can be dangerous because if you default on payments for any reason, you could lose your property to a credit card debt.

5. Get your creditor to lower the interest rate

Don’t overlook this next method as it is so simple. Sometimes the simple things in life are overlooked the most.

Call your creditor and ask for a supervisor. Remind them how many years you’ve been their customer and how perfect your payment history has been over those years. Now tell them you’re upset they’re charging you such a high interest rate and illustrate an offer another bank is making you. If your credit rating has improved from when you first applied for this credit card, mention that as well.

Do your research and find a credit card company that offers a lower interest rate and you can then use that as leverage.

Example: “Capital One offers me a credit card with an interest rate of 8% and 1% more than what you offer in cashback. Could you please lower my interest rate so I can stay with your bank? Also, you will find that my credit score has improved compared to when I first applied for a card from your bank two years ago.”

6. Debt Relief Programs:

A consumer credit counseling program can lower your interest rates and put you out of debt in less than five years without hurting your credit score. All of your credit card debt is consolidated into one monthly payment, and the consumer credit advisory firm then distributes the money to your creditors each month, but at a reduced interest rate. This program has the lowest impact on credit scores compared to other debt relief programs.

A debt-repayment program should only be used if you’re delinquent on credit card payments and can’t afford to pay more than the minimum monthly payments. The reason is that this type of program can drastically reduce your credit score and result in negative endorsements on your credit report. However, if your credit rating is already in the pit, your only focus at this point is to get out of debt as quickly as possible and avoid bankruptcy. Once you’re debt free, you can start building your credit again.

If you’re on the verge of bankruptcy, paying off debt can be a viable alternative that will put you out of debt in about three years and give you an affordable monthly payment for all of your unsecured debt.

Need more options to get rid of high credit card balances? Check out this article next.