If you keep your capital on several credit cards, you are probably lucky enough to have the cost of repaying your debt. If you can not pay off your credit card debt every month, optimizing your salary is the best solution. Pay the lowest interest rate and save more money. Start by paying the minimum installment amount specified on your credit card debt, and then try to settle your high-interest debt first.
Mistakes in Paying Credit Card Debt:
- Do not hurry:
Researchers in a study by the National Bureau of Economic Research believe that people do not use good mathematical logic to repay credit card debt because they tend to ignore interest rates.
The study found that the average household with two credit cards in the UK pays $90 more per year in interest due to incorrect pay splits. Most indebted households with more than five credit cards pay $1,000 a year in unnecessary interest, which could be avoided by focusing on paying off the credit card debt at the highest interest rate.
While many people pay off their small debts for the first psychological victory, scientists have found that they have lost large sums of money due to interest rates because they have used the “payroll” method.
“Compliance with salaries” Excluding mathematics and logic means that the debtor waives money for his entire debt. For example, you owe $5,000 for one card, $2,500 for another, and $1,200 for debt. Scientists have found that an average person pays $800 for higher debt and $400 for lower debt, regardless of interest.
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This does not mean that we have to pay extra for interest, but scientists have proven that the human brain is prone to making mistakes because the first number we see in credit card documents is the total amount of inventory, not the percentage of interest. This total amount of debt affects our minds a lot and causes us to make the wrong decision.
Do not fall into the trap of repaying credit card debt:
Another mistake we make is focusing on just paying the minimum amount offered to us. Do not do this. This is a psychological trick that credit card banks have designed to get the most out of it, even for years.
Economists certainly refer to written numbers as traps, such as the minimum amount to be repaid. The human brain is quite consciously inclined to make decisions based on the first available information (bank traps) so most of us have a laid back attitude when it comes to painting a picture of ourselves. Question: Why do you ignore the offer that is based on statistics? Answer: Because you are trapped in a trap.
A 2017 study by Canadian Transactions found that 47% of Canadians pay off their credit card debt in full each month, 39% is unsure whether paying more than the specified amount is the right thing to do and 10% each pay exactly the specified amount per month.
Repayment of high-interest credit card debt:
You see, I agree to cooperate with creditors (credit card banks) in the field of timely payment and the amount of the specified amount, but if you let the credit card documents convince you that the minimum amount specified for repayment, the maximum amount You can pay, it will cost you a lot.
Suppose you have a $2,500 credit card with a 19.99% interest rate of about $75 a month. And suppose you do not ask to add to your inventory. With that in mind, it takes sixteen years and eight months for you to zero your debt. Of course, you pay $2,862 in interest to the bank during this period – in other words, repaying this amount will cost you about $5,362 during this period.
If you pay only $25 more than the minimum repayment amount of $75, you will get rid of your credit card debt 13 years and 11 months earlier, save $2,101 in interest and pay only $760 in bank interest. And most importantly, your debt will be zero a decade earlier. No wonder why banks like to pay only the specified amount.
How to Accelerate Credit Card Debt Repayment?
- Normal payment:
Payments may be made at any time as this will reduce the down payment. Sometimes it is better to refuse to buy goods to pay off your credit card debt as soon as possible. In practice, the borrower has to pay a monthly double payment.
- Payments that are not in the debt repayment plan:
Banks often issue regular payment plans with card payments. The credit card is calculated for the entire duration of the agreement. Therefore, maturity can be calculated one year in advance. Such a plan is beneficial for the bank but not for the borrower because the program is designed to maximize the overpayment. Therefore, it is more profitable for the borrower to pay the maximum amount possible to pay off the debt faster and minimize the overpayment.
The refund program is done without re-depositing funds from the credit card. If you make such a payment plan, you will not be able to repay the debt even during the year.
- Develop a new payment plan:
If you no longer need to use a credit card and want to deactivate it, you can call the bank. The bank employee should clarify the size of the debt and prepare a new repayment plan with it. To do this, the borrower must determine the maximum amount he is willing to refill his credit card each month so that he can have the money to meet his current needs.
Reconciliation should be done periodically to ensure that payments are fully received and credited. You can do this at a bank branch, in your personal online bank account, or by contacting the center operator.
- Disable additional services:
If you pay for all additional services, including SMS alerts on budget receipts and fees, internet banking, and payment. At first glance, the cost of such services is small, but refusing services saves money and sends money to pay off debt.
In this article, we explained how to solve the credit card debt problem and reduce the total amount. The bottom line is to get rid of debt as soon as possible by paying the lowest possible interest; you have to pay off your debt strategy and prioritize high-interest debt and pay more than the amount specified by the bank. The formula for solving this problem is really simple.
Today, millions of people receive credit cards at banks because they have many benefits, including easy registration. This method allows you to solve temporary financial problems and buy necessities.
“If you have any feedback about the best way to pay credit card off fast that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”
NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.