How to Pay Off Credit Card Debt - Reduce Your Debt - Woman's Day
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Decrease Your Debt
Shrink that pile of bills with these six smart strategies
By Mary Hunt
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It's the new year, which means it's time to
take a deep breath and pay down your credit
cards and other debt. Once you get started,
you'll be happy you did.
Prioritize credit card bills
Photo by: Jenny Bowers
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The interest rate is what matters most when
you're digging out of credit debt because
that's what costs you more money in the long
run. Pay off the highest-interest-rate card
first, regardless of the balance, while also
paying the minimum on your other cards,
says Liz Weston, author of The 10
Commandments of Money. Once the
highest-rate card is paid off, apply the same
amount you'd been paying on it to the next-
highest-rate card, and so on.
Give your cards a break
Tempting as it may be to keep charging, don't—not even for inexpensive stuff. "Charges add up
faster than you realize, so leave the credit cards at home," says financial planner Harrine
Freeman, author of How to Get Out of Debt. "Pay in cash only until you wipe out the debt."
But don't cancel your cards, even if you have several. "Closing them lowers your available credit,
which could negatively affect your credit score," says Weston.
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Refinance your car loan
Don't waste time asking your lender for a better interest rate. Odds are they won't knock it down.
Your best bet? Look into refinancing, especially if rates have dropped since you bought the car
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How to Pay Off Credit Card Debt - Reduce Your Debt - Woman's Day
and your FICO score has gone up. "If your credit standing is better now, it will help you get a
much lower rate, perhaps even low single digits," says Greg McBride, CFA, senior financial analyst
at Bankrate.com.
Follow the 1/12 rule
Here's how to pay off your mortgage faster: Each month, when you make your regular mortgage
payment, add an extra 1/12 of that amount and designate it as "Principal Only." At the end of one
year, you'll have made 13 monthly payments. This cuts five years and two months from a
$160,000 30-year 5.5% fixed-rate mortgage, saving you $33,102.85 in interest! (First, check that
your lender accepts principal prepayments.)
Find a debt buddy
"Each week, check in with a friend who is also trying to get her financial house in order," says
financial coach Glinda Bridgforth, author of Girl, Get Your Credit Straight! "It's a great way to
get advice and encouragement."
daily giveaways
Picksie iPad Giveaway
Consolidate!
Save money paying interest on your debt by transferring all your credit card balances to one 0%
APR introductory card. But keep in mind that you'll have to pay off the balance in full before the
intro period ends, or else you'll be hit with a high interest rate.
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