By: Tori Harris
For most people, a new year equates to new beginnings, a fresh start, a clean slate. If this is the case, why does holiday debt linger over us like the ghost of Christmas past? If you’re still paying the price for overspending during the holidays, you’re not alone. We have some tips to help you shed that holiday debt.
Several financial institutions and credit card companies offer balance transfer promotions at the beginning of the year, allowing you to transfer your existing credit card balance with a high interest rate to a new one with a lower interest rate. What’s better than paying low interest? Paying no interest! Currently, VyStar is offering free balance transfers at a 0% APR* for 12 months for new and existing members who transfer external credit card balance(s) to a VyStar Visa® Credit Card. Taking advantage of balance transfer promotions gives you some extra time to pay off high balances and helps you avoid paying more in interest each month.
You have options when it comes to paying off more than one credit card at once. You can either focus on paying the higher or lower balances first. Some prefer to start with larger balances because they accrue more interest, and paying them off early could help you avoid some of that interest. Others, however, believe that paying the smaller balances is a better motivator because it allows you to set smaller, achievable goals and gradually work your way up to paying off larger debts. No matter what approach you take, as long as you are making payments that are large enough to cover your current month’s new spending and the interest charges, your debt will be reduced. Choose the strategy that works best for you and stick to it.
If you don’t want to think about which card to pay off first, consolidate all your balances to one card. Consolidating your balances may just make your debt feel like a bigger mountain to climb, but when you combine each card’s separate interest rate and consider how much easier it is to manage one payment as opposed to multiple payments, climbing one large mountain starts to look a lot better than climbing multiple small mountains spread out over a long distance.
If you want to shed your debt at a faster rate, think long-term about your interest rate. It may feel like making a minimum payment of around $25 a month is a practical way to pay down debt, but you will save a lot more money in the long run by making more than the minimum payment to your credit card each month.
If your overall credit card balance is $2,000 with an interest rate of 17%, your minimum payment each month amounts to around $40. Thinking short term, a $40 monthly payment seems like a reasonable approach to paying down debt. However, in the long run, it will take you about 88 months to pay off your entire balance and you’ll end up paying around $1,500 in interest charges. The more money you can pay above the minimum amount due, the more money you’ll save in the long run—and the sooner you’ll be debt-free.
For more information on how to manage debt, contact a VyStar representative by visiting your local VyStar branch, or call us at (904) 777-6000 or 1 (800) 445-6289.
The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. VyStar Credit Union disclaims any liability for decisions you make based on the information provided.
*APR=Annual Percentage Rate and is current as of January 1, 2020. Promotional rate is valid on balance transfers from non-VyStar loans/credit cards when completed by March 31, 2020. Rate on unpaid balances returns to standard variable or non-variable APR (currently 10.60–15.00% APR) twelve (12) billing cycles after completion date of the balance transfer. All loans subject to approval and actual rate may vary and is based on an evaluation of the individual’s credit history. Programs, rates and terms are subject to change at any time without notice. Certain restrictions apply. Balance transfers and cash advances do not earn rewards points or cash back. Business and Savings Secured VISA cards are not eligible for this promotion. ©2020 VyStar Credit Union.