5 ways to pay off credit card debt accrued during coronavirus
The right strategy can make managing credit debt during the coronavirus pandemic easier. (iStock)
The coronavirus pandemic has led more Americans to lean on credit cards to pay bills and cover everyday purchases. For some people still facing financial hardship associated with COVID-19, managing credit card debt has become a major source of stress.
If you're concerned about keeping up with credit card debt, these five tips can help.
- Consolidate debt with a personal loan
- Open a balance transfer card
- Follow the debt snowball method
- Follow the debt avalanche method
- Use a combination of debt snowball and avalanche methods
1. Consolidate debt with a personal loan
Using a personal loan to pay off high-interest credit cards could save you money and make keeping up with monthly payments easier.
With interest rates near historic lows, now could be a good time to consider a consolidation loan for managing credit card debt. Visit Credible to compare personal loan interest rates from multiple lenders without impacting your credit score.
SHOULD YOU GET A PERSONAL LOAN TO PAY OFF CREDIT CARD DEBT?
"A personal loan used to consolidate and eliminate debt may be helpful to some people because interest rates are generally lower than other rates on debt," said Sean Fox, president of Freedom Debt Relief in San Mateo, California.
If you're interested in consolidating your cards using a personal loan, it's helpful to use an online loan calculator to estimate your monthly payments.
2. Open a balance transfer credit card
Balance transfer cards that offer a 0% APR can also be a helpful way to save money on interest while streamlining credit card monthly payments.
Fox said that if you're considering a balance transfer offer to be sure that you can pay off the balance before the promotional rate expires. Comparing balance transfer offers from different credit card companies can help you find a card that offers the best terms. Credible makes it easy to compare balance transfer cards in one place to help decide which one to apply for.
If you're interested in looking at other credit card options, Credible has you covered. You can view a variety of card types in one table. Click here to browse credit card options, including balance transfer and zero percent credit cards today.
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3. Follow the debt snowball method
The debt snowball method advocates paying off credit card debt from the lowest balance to the highest. You apply as much extra money as you can toward the first debt on your list while making minimum payments toward the rest. As you pay off the first card, you roll its payment over to the next card on the list.
This debt repayment may not save you money on interest if you're leaving credit cards with the highest APRs to pay off last. But there's an upside.
"This works well for people who like paying off a debt — even a small one — in entirety," said Fox. "This often serves as motivation to keep at it and to pay off the remaining debt."
4. Follow the debt avalanche method
The debt avalanche method takes a different approach to debt repayment. Instead of focusing on balances, you order your debts from the highest APR to the lowest. You then throw as much money as you can at the card with the highest interest rate, while making minimum payments to the rest.
Fox said that the avalanche method will get you out of debt quicker while saving more money since you're making a bigger dent in interest charges. But the downside is that you may not get that initial quick win that you would from paying off a smaller debt using the snowball method.
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5. Use a combination of debt snowball and avalanche methods
If you want to merge the best of both worlds when managing credit card debt, you could use what's known as the blizzard method instead.
It works like this: you pay off the smallest debt you owe first to get a motivational boost. Then you switch to the avalanche method and direct your efforts at paying off credit cards with the highest interest rates.
DEBT SNOWBALL METHOD VS. DEBT AVALANCHE: WHAT'S THE DIFFERENCE?
Get help with managing credit card debt if necessary
If you're struggling to keep up with your minimum credit card payments, it's important to stay in touch with your card issuers. You may qualify for credit card hardship relief if your finances have suffered as a result of the coronavirus pandemic. Credit card hardship programs can offer benefits such as reduced interest rates, waived fees, or reduced minimum payments to make managing your debt easier.
You can apply a similar strategy for managing student loans, mortgage payments, and other debts. For example, you may qualify for forbearance or deferment options that allow you to temporarily pause payments until the economy improves and your finances get back to normal.
You can also visit Credible to research and compare loan options for refinancing student loans or mortgage debt.