If you’re in credit card debt because of the pandemic, here’s what to do to start paying it off
This article is brought to you by the Personal Finance Insider team. It has not been reviewed, approved, or otherwise endorsed by any of the issuers listed. Some of the offers you see on the page are from our partners like Citi and American Express, but our coverage is always independent. Terms apply to the offers listed on this page.
If you have your accounts linked up to a budgeting app such as Mint, then you should be able to do a quick inventory of how much you spent on what each month. And if you’re overwhelmed by this task, just take a peek at the last few months. You should get a good idea of where your money went by analyzing even three month’s worth of expenditures.
The pandemic probably forced you to evaluate what you wanted versus what you actually needed in 2020. Although you may have thought you cut back on non-essentials, reviewing your spending may point out that you didn’t as much as you could have. Were there any recurring charges for subscriptions or other products/services that you don’t use or need? Cancel or downgrade anything that isn’t necessary to free up cash.
Come up with a plan
If you know you racked up some debt in 2020 but are afraid to take a closer look, it’s time to dig in. Go through all of your credit cards and any other personal loans you may have used in 2020 and write down the balance and the interest rate for each. This will help you to come up with a plan for how to pay it all off.
Mason Miranda, Credit Industry Specialist at Credit Card Insider, sums it up this way: “This (avalanche method) has you target debts with the highest interest rates first. Once the first is paid off, you’ll have a larger pool of money to put towards the next, burying all your debts beneath an avalanche as you free up more and more money.”
Getting out of debt will likely take you longer than it took to get into debt, so it’s easy to get discouraged. Tracking your progress monthly, or even weekly, is a surefire way to keep the momentum going. Applaud how much progress you make with each payment, and keep focused on the end result of debt freedom.
Use a crutch (if needed)
If the COVID-19 pandemic is still affecting your job status and you’re unable to stick to a debt repayment plan, it may be time to consider other options.
Although there are a lot of balance transfer cards out there, Meghan Gound, Vice President of Credit Cards at Navy Federal Credit Union, states that the best balance transfer cards feature “no fees, zero percent interest during the introductory period, and a low rate after the intro period expires.”
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.