a couple sitting on the floor looking at bills


Getting out of debt may sometimes feel like digging out an entire beach with a child’s toy shovel. But ditching your debt is not impossible. First, it’s important to remember that not all debt is bad. Some debt helps you live a more fulfilling life. For example, student loans may allow you to get the training or degree you need to land a good job. Mortgage loans can allow you to own your own home – few people can purchase a home with cash on hand. Even an auto loan may be considered good debt if it means you can buy a safe and reliable vehicle for transportation.


 

So, what’s bad debt?

Personal loans, credit cards and store cards are not in themselves bad. But having too much debt is bad if you are having difficulty making payments. You may be in over your head if you answer yes to any of the following questions:

  • Do you carry balances from month to month on more than one credit card or store card?
  • Do you pay only the minimum due each month?
  • Do you sometimes exceed your credit limit?
  • Have you had more than one late payment penalty in the past year?
  • Have you ever taken out a payday loan to cover bills?

 

Two strategies for paying off debt

How you work towards paying off debt depends largely on what motivates you. For example, if you want to pay the least amount of interest, pay off the highest-interest-rate debt first:

  1. Pay as much as you possibly can each month on the highest-rate debt, while paying the minimum on other debts.
  2. Once that bill is paid off, direct the money you would have paid to the next-highest-rate debt, while continuing to pay the minimum on remaining balances.
  3. Repeat until debt is gone.

If you are more likely to be motivated by seeing entire balances disappear more quickly, try the snowball method:

  1. Pay as much as you possibly can each month on the bill with the lowest balance. Pay the minimum on other debts.
  2. Once you pay off the smallest bill, start paying as much as you can on the next lowest bill. Continue paying the minimum on other debts.
  3. Repeat until debts are paid.

Of course, neither of these strategies will work unless you stop adding more debt to your load. Commit to getting spending under control. Stay away from the mall, opt to pack a lunch and make specialty coffee a nice reward, not a daily habit.
 

Other debt-reduction strategies

Perhaps you’ve accumulated a wallet full of high-rate store cards because of the promotions they offer. Those offers look attractive, but the average interest rate on a store card is a whopping 25.64%.1
In the long run, what you save on promotions is likely far less than what you are shelling out in interest.

Consider doing a balance transfer to a lower-rate credit card. A balance transfer may result in a more affordable monthly payment and fewer bills to keep track of. Plus, you may save hundreds of dollars in interest payments.

If you qualify, the Advancial Visa® Rewards Plus offers:

  • No balance transfer fees
  • No annual fee
  • 0% interest for 12 months on balance transfers and purchases
  • After that, your interest rate will be 8.90% - 14.90% based on creditworthiness – even the highest rate is way less than the average store card!

Imagine how fast debt could melt away if you are managing one monthly payment at a much lower interest rate.


Save on financial products

Another debt-reduction strategy is simply to lower your monthly costs. For example, are you paying a monthly fee for a checking account? Getting hit with foreign ATM fees just to get to your money? Advancial members have access to our Ultimate Checking account , which features no monthly service fee, no minimum balance requirements, unlimited free ATMs worldwide, free mobile banking - you name it, we’ve got it. .

Getting out of debt isn’t easy, but it’s definitely worthwhile. Advancial is here to help you make the most of your money with free products, low rates and superior service the big banks just can’t match.


1Source: Creditcards.com, https://www.creditcards.com/credit-card-news/retail-store-credit-card-survey.php