How to Pay Off a Credit Card Quickly With Limited Income

How to Pay Off a Credit Card Quickly With Limited Income
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Carrying a large credit card balance that exceeds 35 percent of your total credit adversely affects your credit score. Your credit score affects the interest rate that lenders impose for mortgages and car loans, insurance premiums and approval for a lease. Even with limited income, you can make a dent in your credit card debt. By being proactive and committed to paying off debt quickly, you can save yourself thousands of dollars in interest.

Track expenses. Gather three months' worth of bills to determine where your money is going. Review your bank statements for help. Track cash purchases by writing down every time you spend money.

Create a budget. The budget builds a framework for how to spend your money. Assign funds to different categories, such as utility bills, groceries, transportation, and entertainment.

Determine which items on the budget are non-essential. Cut out expenses such as gym memberships, extracurricular activities, travel funds, gifts, cable and Internet. The idea is to come up with as much money as possible and use the excess to pay down your debt. Pack your lunch for work and make your own coffee, rather than paying for premium espresso in a shop.

Find ways to save on other items on your budget. Make a concerted effort to unplug appliances and turn off lights to decrease your electric bill. Save money on gas by car-pooling to work. Make cheaper meals. Refinance a car loan. With a limited income, creating some space in your budget is critical to be successful.

Target ways to decrease your living expenses. Explore different living situations, if possible. Consider moving if a more affordable option is available, such as renting out a room, rather than an entire apartment.

Increase your income. Take a part-time job or pursue freelance work. Sell possessions online or cash in any valuable assets. Rent out an extra room in your house to decrease your rent or mortgage payment. Even though you currently have a low income, you may be able to supplement it in other ways.

Switch to a cash-only system of payments, divvying up money for the week or month into labelled envelopes such as "rent" or "groceries." Using credit cards and debit cards may make it easier to spend money without considering the consequences. Some people even freeze their credit cards in a block of ice to make sure they are only used in emergencies. By using cash, you can only use what is available and that's it.

Transfer credit card debt to a card with lower interest rate. Maximize savings by transferring debt to a card with a 0 percent introductory rate.

Pay more than the minimum payment on credit cards. If you have $5,000 in credit card debt and your interest rate is 15 percent, your minimum payment will be $112.50. However, paying this low amount will result in 22 years of payments and an additional $5,729.21 in interest on top of the original balance. Use any excess that you have come up with and any additional income to raise your payment amount.

Select which cards to pay off first. Two basic options are available. One strategy is to pay off the card with the highest interest rate first while paying the minimum balance on the other cards. This strategy makes sense because it results in paying the lowest amount of interest. Another option is to pay off the card with the lowest balance first. This strategy is referred to as the "snowball approach" and gives you the psychological benefit of having a card paid off, inspiring you to pay off other cards.


  • A home equity loan may be available to help you pay off debt and pay a lower interest rate. Taking a loan may make sense, as long as you commit not to getting back in debt.


  • Avoid taking money from retirement savings, if possible. This ill-advised strategy may require you to pay taxes to the Internal Revenue Service if you withdraw tax-deferred money from certain retirement accounts and you may incur penalties up to 25 percent if you withdraw funds too early.