- Dave Ramsey has provided some tips on paying off credit cards quickly.
- He recommends getting on a budget that prioritizes paying off your debt.
- Ramsey also suggests using an approach called the debt snowball method.
Dave Ramsey's advice could help you become debt-free ASAP.
Paying off credit card debt can be a major challenge, but it's worth making the effort to try to do it as fast as possible. That's always been the case due to the high interest rate that comes with credit cards, but it's become even more important this year as rates have been going up.
The good news is that there are some techniques you can implement to repay your cards more quickly. Finance expert Dave Ramsey has several suggestions on how to do just that. Here are some of his best tips.
1. Live on a budget that prioritizes debt payoff
Ramsey believes the first key step to paying off debt is to make a budget so you can plan what you'll do with your money. He suggested starting by listing your income and expenses, then putting any money left over after accounting for expenses to pay more towards your credit cards.
This is solid advice because by making a plan for where your money goes, you can use it more wisely -- and by budgeting for extra credit card payments, you will be better able to pay down the principal balance so your debt payoff will be cheaper over time.
2. Prioritize emergency savings
Ramsey believes that before you start making extra credit card payments, you should save up a $1,000 emergency fund as quickly as possible. He describes this as a "starter" emergency fund that will enable you to stop borrowing for emergencies.
While this may seem counterintuitive, it's actually great advice. It can be discouraging to put extra money towards credit cards, see your balance decline, and then have to charge up your cards again when surprise costs creep up. If you have a starter emergency fund, you won't need to worry about this.
3. Stop digging deeper into debt
One of Ramsey's key suggestions for paying off credit card debt is to stop using your credit cards entirely. He suggests you "break up with them and never look back," because if you "stop using credit cards and finally pay them off, you’ll never have to worry about your credit card balance. Ever. Again."
While much of Ramsey's advice is great, the reality is that you can use credit cards responsibly so you don't necessarily need to swear off of them for good. If you're budgeting and paying off your balance in full each month, using credit cards enables you to build your credit and earn rewards with no downsides.
4. Look for ways to lower bills and expenses
Ramsey also suggests cutting other costs so you can send extra money to your creditors. He advises using two different approaches to doing that: dropping certain expenses entirely by cutting some things out of your budget and taking steps to lower bills by being careful about your spending. Lowering bills, for example, could be done by buying generic, making a meal plan, or reducing the electricity you use.
5. Embrace the debt snowball debt payoff method
Finally, Ramsey advises using the "debt snowball method," which is a payoff approach he is famous for. With this approach, you pay extra to your card with the smallest balance first, then move on to your next largest debt and then your next largest debt after that until all your debts are gone.
The benefit of this approach, according to Ramsey, is "motivation and momentum." But the downside is that you could end up keeping a higher rate debt around for longer if you don't prioritize repayment based on which loans have the highest rate.
Ultimately, you'll need to decide if you can stay motivated even if you prioritize your costliest debts first. If you can, then do that while following Ramsey's other tips for budgeting and lowering your bills and you should be well on your way to becoming debt-free.
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