If you’ve maxed out your credit card, first off, don’t beat yourself up too much. We’ve been there and so have more than half of all Americans. It’s easy to feel alone in moments like these, but you’re not. We’re in this together – and we’ve put together a step-by-step guide to help you lower that daunting credit card debt, so you can put your financial worries to bed.
Step 1: Find and cancel those monthly subscriptions
If you hit your limit on a credit card, you’d think that you wouldn’t be able to make any more charges, but that’s not always the case! Often these cards won’t work on new purchases, but if you have a monthly subscription those may still go through.
So, what should you do? Go through your most recent credit card statement to figure out which monthly magazine subscriptions or streaming services are linked to your card. It's time to either break up with them or change the payment method.
Step 2: Lock it down
A handy trick some cards have up their sleeve is a lock feature - a kind of parental control for your card. If yours has one, it's time to flick that switch and prevent any new charges piling on.
You should also check to see if you have that card saved in payment platforms like PayPal, Google Pay, or Apple Pay. If so, remove it immediately so you don’t accidentally use it.
Step 3: Make a budget
With your card on a spending freeze, the next mission is to take a hard look at your monthly expenses. Making a monthly budget can help you cut back needless expenses and stash away some cash to pay off your card.
Where to start? Well, here are a few places where you could find some savings:
- The "I'll definitely use it someday" subscription services
- Restaurant meals that could've been a home-cooked special
- Gas expenses you could avoid with public transportation or carpooling
- High-end food brands when the store brands taste just as good
- Those irresistible "I deserve a treat" clothing items
And, if you have student loans or car insurance, WorkMoney can help you lower those monthly payments! We’ve partnered with Insurify to help you find the best deal on auto insurance and Savi to help you reduce your monthly student loan payments.
Step 4: Pay less in interest
Does this sound familiar? You’re paying your credit card bill, but the balance never seems to go down anywhere near as much as you’re paying.
Yeah, we know that feeling – and it’s because of high-interest rates on your card. For example, if you owe $5,000 on a card with a 25% APR, a quarter of your payments are just going toward interest. That’s not a good deal!
So one really easy way to make your money go further in paying down your debt is by moving the balance from your current card to a low-interest card! The higher the interest on your card, the more you have to pay every month and the more you have to shell out over time to pay it off.
If you can find a balance transfer offer with an introductory 0% APR, that will give you an opportunity to chip away at your debt and actually see the balance go down! But look before you leap – that 0% APR won’t last forever, so find out how long it lasts and what the APR will be before the introductory period ends. You don’t want to end up paying more interest than you were before.
Step 5: Pay more than the bare minimum
Congrats! If you’ve completed steps 1 through 4, that means you’ve cut back on your expenses and on your interest payments. Hopefully, that means you have a little extra cash lying around to start paying down that debt.
With a freshly trimmed budget, it's time to tackle that maxed-out card. If you can manage it, try to pay more than the minimum amount each month. Doing so means you can tame your debt quicker and limit the damage to your credit score.
Thanks to savings from WorkMoney programs, you can pay off your card faster, reducing the total interest paid on your balance.
Additional ways to save
When it comes to tackling a maxed-out credit card, you're not alone.
Swing by WorkMoney to learn more about our members' benefits. We've got saving strategies for everything from groceries to gas, medication, and debt resolution. You're one click away from shrinking your debt and swelling your savings.