INDIANAPOLIS – A couple weeks away from Christmas, a lot of Americans are adding to their credit card balances right now.
Overall credit card debt in the U.S. is approaching $1.2 trillion. If you want to make your slice of that pie a little smaller in the new year, Travis Toll of Bank of America Indianapolis suggests going on the financial offensive.
“You want to start by focusing on paying off debt with the highest interest rates first,” Toll said. “This way, you’ll minimize cost and save more over time.”
Sometimes, he says it’s best to attack the credit cards with the smallest balances first so you can start racking up wins and building confidence. Either way, you need to pay more than the minimum every month.
“Even if you can afford to pay just a small amount over the minimum payment, you will reduce the principle quicker and reduce your monthly interest expenses,” Toll added.
If you have multiple cards, Toll says it might be time to consolidate, either with a balance transfer to a card with a lower interest rate or a consolidation loan. That can mean a single payment, with a single interest rate each month. However, Toll says you need to watch for transfer fees. Consolidation only works if you don’t start running up your credit cards again.
“Often, I suggest folks cut those cards up,” Toll said. “You know, reduce the temptation.”
The key to success, he says, is to examine your spending, look at where every dollar is going, and cut down wherever you can.
“The two or three stops at the gas station to grab a soft drink, or a quick run through the drive-through to grab lunch,” he said. “All that adds up to such large amounts that if we really become aware of it, we start saving more.”
In the age of online banking and digital currency, it’s easy to forget there are people working at your bank who can help you. Toll recommends setting up an appointment with your banker and coming up with a debt reduction plan that works for you.
