How To Pay Off High Interest Credit Cards

Are you trying to pay off your high interest debt but can’t seem to get ahead?

We’re going to specifically talk paying off high interest credit card debt in this article. However, this could apply to any debt you are trying to eliminate – Car, House, School Loans, etc…

Interest Racking Up

Let’s look at one of your high interest credit cards. If you don’t already know what your interest rate is, find that out. It will be on the credit card statement you receive every month.

Let’s look at an example – $10,000 owed on a 25% interest rate credit card.

If you pay $250 per month on this credit card, you’ll be paying on it for 84 months. The total interest (or “free money”) you’re giving to the credit card company would be $10,885. That’s 7 years you are stuck paying $250 a month. Even worse, you’re paying DOUBLE what you spent due to the interest on the card.

Simply put…. You used this credit card to buy a fancy sweater for $120. Nice! (Sarcastic tone there, girls)

Instead of $120, because you put it on your credit card and you only pay the minimum each month, you just paid $240 for that sweater. In seven years, you may still be paying on that sweater that you’ve long forgotten. Was that sweater worth $240?

I realize not everyone owes $10,000. Some may own more, some may own less. There’s a great calculator at Discover if you’d like to put in your actual amount owed, current payment, and interest rate.

Small Changes

We now know if we had a $10,000 credit card with 25% interest rate and paid $250 a month, we would pay that card off in 84 months or 7 years.

What if we could go to $300 per month? With $50 extra per month (that’s $12.50 per week), your payoff time would shorten to 56 months or a little more than 4 and a half years. (4.67 years to be exact)

The “free money” you were giving the credit card company was $10,885. With an extra $12.50 per week, you’re now giving the credit card company $6,734.

Big Changes

Does $6,734 still sound like too much for you to give to someone else? Or does over four years still seem too long to be paying on this credit card?

It feels that way to me too.

Let’s think about the bigger changes we could make. I want to pay this credit card off in one year and then roll this payment amount to my other cards/debt and be debt free in less than two years.

$10,000 in one year may seem impossible, but many people out there have done it and so can you. Let’s see what it would take to get this one card off your plate in one year.

$1,000 is what it would take per month. That’s approximately $250 per week. Is that scary? It shouldn’t be.

You’re already making at least the minimum payment on this card right now. That’s likely around $250-300 per month. That leaves around $700-750 you need to come up with per month (or around $200 weekly).

There are a few ways to come up with this cash. First step is to look at what you’re paying on your other debts. Are you making more than the minimum payments on any other debt, such as other credit cards or student loans or house payments?

Stop that. (Sorry – that sounded a bit rude, didn’t it?) You need to concentrate on one item at a time. Focus all your extra payments into this one card.

Find More Money

You need to find around $200 weekly. How can you do that? Besides setting the minimum payment on your other debts, pick up some side jobs or cut your spending.

Is your “going out to eat” budget $100 a week? Could you cut that down for ONE tiny year to meet your financial goal?

Could you suck it up and get a part time bartending gig on the weekend for $100+ for one year? Freelance or pick up some Fiverr.com gigs! I’ve got a page dedicated to finding side hustles here if you want some ideas.

It’s easier to make changes when we know these changes are not permanent.

How to Make This a Priority

I’ve spoken about paying yourself first a few times within different articles. You may think I’m overkilling this phrase, but this is the key to success in my opinion. I know this is what works. You have to make this one credit card your priority for 12 months (or less if you can!).

The Bad Scenario:

You know what you make every week. Say that amount is $1,300 take home pay. You’ve done your budget and you know how much you want to place on your credit card debt. You make the credit card payment once a month with the funds that are leftover after all your other expenses. Some expenses ended up being higher so your leftover amount to pay off the card is a little less, but you are making a larger than minimum monthly payment.

This is NOT how it should be done!

Ladies, this is not making the credit card your priority!

The Right Scenario:

You know you need to pay $400 per week to meet your goal of paying off your credit card in one year. However, you cannot afford to send $400 per week to the credit card company from your main salary. On payday, you send (or automatically draft) $300 to your credit card, which is priority #1. You picked up a side hustle to support the other $100 per week that you need to meet the $400.

Let’s say you picked up selling some items on Etsy and/or eBay to make the extra $100. When that $100 is met, you immediately send that straight to the credit card company.

This is what it means to make this credit card a priority.

You Stay on Task and Pay off the Credit Card

Wow – You did fantastic! You can now take the money you were putting towards that one card and put it towards your next goal. Maybe the next thing is paying off your student loan. It could be paying off your mortgage or saving for a home.

If you can do this for ONE small year – you are changing your entire future. Never stop trying to improve the income you have coming in. If you’re able to knock out the first debt on your list in less time, think of how much more you can accomplish as you roll those funds into your next goal.