How to Pay Off Credit Card Debt: Part III

This article will continue to give you the last steps that you can follow when deciding how to pay off credit card debt.

Cut Your Credit Cards into Pieces

If you are serious about paying off your credit card debt, the best solution is to cut up your credit cards so that you don’t charge anything else to them.  This will help you to avoid the temptation of using the credit cards to purchase items that you cannot afford and which you don’t even need.  If you think that cutting the credit cards is not for you, or you are not ready to seriously decide how to pay off credit debt, at least make them inaccessible.

How to Pay Off Credit Card Debt

A good way of making your credit card inaccessible is to store them in a safe place away from where you live if possible so that it will give you time to rethink impulse buying in case you are tempted to use them.  It does not help to keep adding debt to one that you are already struggling to pay off.  You would rather seek free food assistance from your state than use your credit card to buy the food.  If you are really in need, then you will qualify for this assistance.  Some states in the nation offer between $300 and $400 per month in tax-free food money on a debit card.  Using a credit card to pay bills is the same as postponing the day when your financial situation will explode in a much worse situation.  So learn how to pay off credit card debt now.

Sell Unrestricted Investments to Pay off Credit Card Debt

Another step on how to pay off credit card debt is to sell unrestricted investments.  If you are paying interest rates that exceed 10% and they are not tax-deductible, it is always better to lower the amount of debt that you owe credit card companies than to invest.  You can decide to sell investments that you have and use this money to repay balances on your credit card.  Be careful when choosing which investments you want to sell as selling some investments can incur bad tax consequences if the choice is not good.

Choose a 401(k) loan to pay off your credit card debt

When deciding how to pay off credit card debt, you can try and use a 401(k) loan to help you on your journey of being debt free.  This is because taking out a 401(k) loan will mean that you will be paying interest to yourself as the interest you pay on the loan goes into your account.  More information on this subject can be found online.  It is a good idea to strictly follow the rules of 401(k) loans to avoid losing out through penalties.  For example, you need to avoid the income taxes and the 10% early withdrawal penalty charge that is added to the loan by repaying the loan within the time frame that IRS has allowed.  Financial experts say that you should not simply sell your 401(k) assets, get the money and help reduce your credit card debt.

Take Back Roth IRA Contributions

Another thing that you can do when deciding how to pay off credit card debt is to withdraw Roth IRA contributions as the IRS rules allow you to do so.  Ensure that you withdraw only the contributions that you have made into your account and not the gain earned on your money.  For example, if you deposited $30,000 into a Roth IRA in the past 10 years and you have accumulated a total of $15,000 in profit, you can withdrawal up to $30,000 without facing any unfavorable tax consequences or penalties.  This will mean that the money you withdraw is in the reach of the tax man but it is better to use it to reduce your credit card debts and the high interests that come with the debt.

Use the Snowball effect to your advantage

Learn how to pay off credit card debt by using the snowball effect to your advantage.  Pay off credit cards with the lowest balance first before moving onto those with bigger balances.  The ultimate goal of sorting out your financial situation should be to increase the amount of cash that comes into your account every month.  If you have more excess money in your account, the more you will have to reduce your credit card debt.

Paying off more than the minimum monthly cash required to pay off a loan has proven to help pay the loan off faster.  This makes your money do more and go further by paying off the lowest credit card debt balance and then moving onto the next lowest.  This process is repeated until there is only one single big debt left.