How to Tackle Credit Card Debt in 2021

2020 was a rough year and your credit cards might have been put to use more than expected. Maybe you added more to the holiday gift list last year or perhaps you had some emergencies to take care of, whatever the situation, having credit card debt pile up is no fun. If you’re looking to get back on the right financial track, here are a few steps you can take to help you start crushing that debt. 

Create a Plan

In order to start eliminating the debt, you’ll need to know how much you owe. Start by making a list or spreadsheet with the names of your account, amounts owed, credit limit and interest rates for each of your cards. Next, you’ll want to look at your spending and create a budget. Look for areas where you can cut costs to allow you to contribute more to paying off your debts. Hughes members can get a deeper look into their spending habits and get a breakdown of their purchases with myHUB. The digital banking tool categorizes your spending to give you a better view of your finances to help you build a budget and set goals.

Do Some Research

Give your list a look and review your balances and interest rates. If your credit score is good but you’re having a hard time making multiple payments, you could qualify for a much lower interest rate and cut your payments down to just one. Do some shopping and look for the lowest rate possible. A credit card balance transfer will allow you to ditch those high interest rates, sending more of your money towards the balance. 

Choose Your Payoff Method

Two of the most popular strategies used to reduce debt are the snowball and avalanche methods. Choosing which one depends on your situation and personality. With the avalanche method, the aim is to pay off the card with the highest interest rate first. Once the card is paid off, you’ll take what payment you were making on that card and apply it to the next card on your list. If you want to make less interest payments and pay off the debt sooner, then go with the avalanche method. The snowball method prioritizes eliminating the card with the smallest balance first. Once that card is paid off, you roll that payment to the next card with the smallest balance. If you think you’ll need the motivation to help you stick to your plan, try the snowball method. Paying off a credit card can feel rewarding and help you maintain your focus. 

Build Better Financial Habits

You definitely don’t want to step into the credit card debt ring for round two, so it’s a good idea to take a look at the habits that got you there in the first place. Taking a closer look at your purchasing habits and assessing “wants” versus “needs” can allow you to see problematic habits and where you’re overspending. If emergencies were a big cause of increased debt, then creating and maintaining an emergency fund might prove to be useful.