So you have a ton of credit card debt — here are 4 ways to tackle it head on

Credit card debt is like a shadow looming over your financial world. It may not ever seem like an emergency, but it's always in the back of your mind.

The best way to get rid of that nagging feeling is to make a plan and address it directly. Here are four tried-and-true methods to make that process a little bit easier.

Start a budget

The first step to paying off credit card debt is to get a handle on your expenses. Start by comparing how much you’re spending to how much you’re earning.

Write down how much income you actually take home each month. Then, go through your bank account and credit card statements for the past three months.

Add up the total amount spent each month and compare that number to your income. If you’re spending more than you’re making, you need to cut back. Look at discretionary categories like entertainment, eating out, clothes and more to see what you can pare down.

Ask to decrease your interest rate

One of the most underrated ways to pay off credit card debt is to contact the card company and ask for a lower interest rate. Just call its customer service department and mention that you’re looking for a lower interest rate.

If they don’t instantly agree, you may need to convince them. Talk about how you've been a loyal customer for a long time, made on-time payments every month and how much you would appreciate a lower interest rate. If you have any recent extenuating circumstances, like a health crisis or job loss, you can also mention that.

Some card providers may only be willing to do this for customers in good standing, so it’s best to do this before you’ve missed a payment.

Try this strategy for every card you have. If a provider declines to give you a lower rate, set a reminder to ask them again in a few months.

Consolidate credit card debt

A debt consolidation loan is a personal loan where you use the funds to eliminate your credit card balance. You can get a debt consolidation loan from online lenders, traditional banks, credit unions and more.

Debt consolidation loans may have lower interest rates than credit cards, so you can save on interest while paying off your balance. If you have multiple credit card balances, you can pay them off with one single loan and simplify your monthly payment routine.

Let’s say you have $15,000 in credit card debt with 15% APR. Your minimum monthly payment is $375.

If you take out a debt consolidation loan with 8% interest and a five-year term, your new monthly payment will be $304.15. You will also end up paying $2,676.76 less in total interest.

To qualify for a debt consolidation loan, you generally need a credit score of 650 or higher. If your score is less than that, you may only be approved if you add a cosigner to the loan. A cosigner is an individual who has good credit and is willing to take over your loan if you default.

Apply for a balance transfer offer

Opening a new credit card with a balance transfer offer is a popular way to save on interest while paying off credit card debt.

Some card companies offer 0% APR for customers who transfer an existing balance to their new card. These special offers will usually last between six and 21 months. During that time, interest will not accrue on the card as long as you make on-time payments. Once the offer ends, the interest rate will switch back to a regular rate.

The key to maximizing this strategy is to pay more than the minimum before the 0% offer expires. Even if you can’t pay off the whole balance before the offer ends, you may still be able to save hundreds or even thousands in total interest.

Balance transfer cards almost always come with a balance transfer fee, usually 3% or 5%. For example, if you have a $5,000 balance, you could pay a balance transfer fee of up to $250.

If you do open a balance transfer card, make sure to pay each bill on time. If you pay late, the 0% APR may be rescinded.

View the original article at Chegg Life and signup for the Chegg Life Newsletter

Related...