As Arizona residents may know, paying the minimum amount due on a credit card balance may be counterproductive. While there are times it might not be possible to pay more, the amount of interest paid on credit card debt may approach the original amount owed when a person pays the lowest amount possible. Hypothetically, someone with $18,000 of debt at approximately 18 percent interest paying about $400 per month would take about 76 months to pay it off. Additionally, the individual would pay about $12,200 in interest on the original $18,000.
Setting aside money each month to add to the monthly payment might be a good idea. This may involve cutting back on non-essentials, such as movie rentals, turning up the air conditioner or eating out. In addition, limiting the size of an income tax refund and using the saved funds to pay toward the balance may reduce the debt substantially. It may be possible to adjust W-4 withholding to reduce the amount of the refund, and the extra income may be used to increase monthly credit card payments.
Reducing interest rates is also beneficial in some cases. An executive at Visa says one way to do this is to find a credit card with a low introductory rate. If transferring balances is permitted, adding the existing debt to the new card may help. However, it is important to see what the interest rate will be after the initial grace period is over.
Events such as unexpected unemployment or sickness may make paying off debt unmanageable. When that happens, credit ratings may sink and creditor harassment might begin. Discharging debt by declaring bankruptcy may make it possible to start over. An attorney might review the options available for debt relief or the type of bankruptcy that might help as well as the requirements a debtor must meet to file.
Source: USA Today, “Personal Finance: How can I pay off credit cards faster?“, Robert Powell, September 02, 2014