1. Credit Cards: Introduction
  2. Credit Cards: A Brief History
  3. Credit Cards: What Are Credit Cards?
  4. Credit Cards: Terms Of Agreement
  5. Credit Cards: Types Of Credit Cards
  6. Credit Cards: Making Payments
  7. Credit Cards: Pros And Cons
  8. Credit Cards: Choosing A Credit Card
  9. Credit Cards: Conclusion

By Brigitte Yuille

It's a common goal that you share with other credit card holders: the desire to pay down a credit card balance. Most people know paying down the balance before the due date will make the debt less expensive. However, overspending, an emergency or other event may have caused the balance to be carried over a few or several billing cycles. Some strategies can be used to reduce interest charges and late fees or penalties, and to quickly pay it down. These methods are especially helpful if you are heavily in debt and you have several credit cards. (For more tips, see Expert Tips For Cutting Credit Card Debt.)

Whether you finally decided or are finally able to not let the credit card balance sit and accumulate fees, stop using the credit card or cards immediately. If you think you'll struggle with self control on this front, you may want to cut them, place them in a lockbox or do whatever is needed in order to prevent you from making the debt even worse.

Now, pull out a piece a paper and pen or computer and gather all of your credit cards. Start writing the down the interest rate, balance and minimum payments.

Methods for Paying Down Your Debt
Now, let's examine a couple of approaches you can use to pay off the debt. One method is to pay the smallest balance first. This method is quick and will provide relief when the balance is paid off. It may also help to motivate you to tackle the other debts. However, if you have credit cards with a higher interest rate, the debt on those accounts will only become more expensive.

Another option is to pay balances that are closest to the limit on the particular card, especially if the credit card is maxed out. Cards in this state can nix your chances of getting a better interest rate. Interest charges will be the least of your worries because a maxed out card carries over-the-limit fees and can also put a dent in your credit rating. This is because your score looks at how you are using the credit. Keeping the balances low makes you appear more credit-worthy. This approach will also prevent your interest rate from climbing. (Find out why maintaining your credit score is so important in The Importance Of Your Credit Rating.)

However, the most recommended approach to quickly pay off the balance and reduce the debt is to pay balances with the highest interest rate first. So, line up the cards from the highest interest rate to lowest and list them on a piece of paper. If your credit is in good standing, check to see if you can get a better rate to help reduce the expense.

Using a combination of approaches may help you tackle the debts, but you'll want to put your focus on the debt that you are targeting. This is done by paying the minimum for each credit card, except for the one that has the highest rate. For this card you can pay a higher amount that aligns with the capabilities of your budget. Once the target debt has been paid, move to the next card with the next highest interest rate balance and repeat the process of paying more for that balance while paying the minimum for the other cards. When you are done paying down your credit cards you may want start applying the extra money to a savings account.

Another option is to transfer the balances to your lowest rate card. This approach is available to those with good credit. You also want to make sure you won't have a problem making the payments. The key is being able to make the transfer work in your favor and also to be cautious of all the fees that may be involved. Most credit card companies will provide enticing offers such as a grace period, low interest rates and free balance transfers. Look for cards that offer 0% interest on balance transfers and purchases. Sometimes the balance transfer will have an additional fee. Make sure the dollar amount has a cap, as some credit card companies have been known to charge a limitless fee based on a percent of the balance. Check the credit card agreement and call the company to learn about the fee. Also, remember that any introductory interest rate on a new card is only temporary. It typically lasts between six months and a year. Mark the calendar when the period ends. (To read more about using a balance transfer strategy, read Shuffle Away Your Debt With Balance Transfers.)

Watch out for bait and switch tactics, which occur when the initial offer is a good rate but upon receipt of the card the interest is higher. When you transfer to the lower rate card, try not to use up all the available credit, and be sure to keep the balance on the card low to avoid additional damage to your credit score.

Credit Cards: Pros And Cons

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