Credit cards make life so much easier for us, but only if they are used responsibly. Unfortunately, the ability to purchase on credit can often tempt us to buy more than we can afford. This can have disastrous consequences if you cannot afford to pay your outstanding bills on time.

For one thing, late payments stay on your credit reports for 7 years and can hurt your credit score significantly. Carrying high balances compared to your credit limits also affects your credit utilization ratio negatively. This is another factor that affects your credit score. In addition, lenders charge steep penalties for overdue payments, which could push you further into debt. Paying off your credit card bills punctually is the only way to avoid getting into a debt trap.

These 5 tips for paying off credit cards will help.

#1 – Set Time Aside To Make A Plan

There’s no one-solution-fits-all when it comes to paying off credit cards. Everybody’s financial situation is different. The goal is to make a realistic plan that fits your financial circumstances and your spending habits. This is especially important if you are managing multiple debt payments every month. Without a proper plan in place, you’re more likely to get careless about due dates and payments.

Start by making a list of all your debts along with the interest rates and monthly payments. Then create another list with your monthly income and essential monthly expenses such as rent, utilities, and groceries. The balance after spending on your essential monthly expenses is what you can afford to use to pay off your debts. With an accurate picture of your finances, you can then decide which strategy to use to pay off your credit cards.

#2 – Use The Avalanche Method

This is one of the best ways to pay off your credit cards while also reducing your overall debt. With this strategy, you pay off your debts with the highest interest rate first. Credit cards usually have the highest interest rates of all debts.

Here’s a step by step way to implement the avalanche method:

• Make the minimum payments on all your accounts. This includes your student and vehicle loans, mortgages and all credit cards.
• Use the balance money, pay off the credit card with the highest interest rate.
• Use the remaining money to pay off the credit card with the second highest interest rate. Go down the line paying off your credit card with the next highest interest.

You’ll pay less overall when you pay off your debts in order of interest rates. Not only will this save you money, it will also help you get out of debt faster. The one downside is that it takes longer to see progress. If smaller wins work better to keep you motivated, the next method may be a better option for you.

#3 – Use The Snowball Method

This is quite different from the avalanche method. In the snowball method, you ignore interest rates and focus only on your balances. You pay off your small credit card balances first.

Here’s how to implement the snowball method:

• Make the minimum payments on all your accounts. This is important regardless of which method you use.
• Use the money you have to pay off your debt with the smallest balance. With that paid off, use the remaining money to pay off the debt with the second lowest balance.

In this method, the small wins act as much-needed motivation, which can help when dealing with a lot of debt. It is especially helpful when you have to pay off outstanding balances on multiple credit cards. However, it has one major downside that you should be aware of. By ignoring interest rates, you may end up paying off higher interest debt later. In the end, you’ll pay more in terms of interest fees.

Use the snowball method only if you think you really need the motivation to keep going. Otherwise, the avalanche method will help you save more.

#4 – Use Your Savings To Pay Down Credit Card Debt

Do you contribute regularly to a savings plan? Most people do and this is generally a good idea. It helps you save for those expensive medical or vehicle emergencies. However, you may want to rethink your strategy when you have outstanding debts. The interest on savings plans typically is much lower than the interest you pay on loans and credit card debt. You’ll save much more if you use the money to pay down your debts first instead of putting it away in a savings plan. Once you have put away enough towards your emergency fund, stop further payments until you’ve paid off all your credit card and other debts.

#5 – Get A Balance Transfer

This works by transferring your high-interest credit card balance to another credit card with a lower interest.

To do this, make a list of the credit cards on which you’re paying interest on the balance. Determine how much balance you can or wish to transfer. Find out if your card has a balance transfer offer. If not, apply for a new balance transfer credit card. Make sure you get one that has a 0% APR on balance transfers. Most offer 0% APR for a set period of time only. Make sure you understand the terms, conditions and any hidden fees before signing anything.

Once you get your balance transfer credit card, transfer the balances from the older cards to the new card. To stay on top of your debt, commit to paying off your balance on the new card as quickly as possible. Preferably before the 0% period ends.

The benefit of this method is that it opens up new credit lines after you pay off the balance. The downside is that it can be tempting to use your newly available credit to accumulate more debt.

Tips to Pay Off Credit Cards

Credit card debt can damage your credit scores and have a ripple effect across your financial life. Don’t let that happen to you. Take stock of your finances and use the tips above to stay motivated and on track with paying off your credit cards.