Suze Orman Says This ‘Foolproof’ Strategy Will Help You Pay Off Credit Card Debt Fast
As of the last quarter of 2023, American credit card debt totals about $1.129 trillion. This mountain of debt is one that just keeps growing, trapping many under impossibly high interest rates that keep them in a never-ending cycle of debt.
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But there’s a light at the end of the tunnel. In this article, popular financial expert Suze Orman shares a foolproof strategy that will help you pay off your credit card fast — even if you’ve been in debt for years.
Start With Making Payments Through Balance Transfer Cards
There may be many things outside your control, but credit card debt is not. Paying off a card with a 15% interest rate saves you that extra 15% charge, which you didn’t even borrow in the first place.
To pay your debt fast, check if you qualify for a balance transfer card that offers a low or 0% introductory interest rate for the first six to 12 months. If you can get a good deal, move your high-rate debt to that new card.
“Always pay [at least] the minimum due on each card, on time, every month,” Orman said. “Whenever possible, send in some extra money on the card that charges the highest interest rate. Your goal is to get the costliest balance paid off first. When the first card is cleared, direct your payments to the card with the next-highest interest rate. Keep doing this until you’ve zeroed out the balances on all your cards.”
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Reduce Spending on Nonessentials
It’s common to see people with unpaid credit card balances keep growing that debt. If you don’t manage your spending habits, it won’t matter how fast you pay off your debt because you’ll end up acquiring more.
“If there are any wants showing up on your credit card statement, that has got to stop right now. There is no excuse or reason to pay 22% interest for something that is not an essential need,” Orman said.
Improve Your Credit Score
A credit score may range anywhere from 350 to 850. However, if your score is higher than 720, you’re considered to have good credit and should qualify for better loans and interest rates. If lower than that, however, you are likely paying more for financial products.
“One of the best ways to boost your credit score is to make all payments on time. No excuses. And reduce your spending,” Orman said. “A large part of your credit score is tied to the total balance on all your cards. The lower that total sum is, the better your credit score.”
Besides on-time payments, also get your utilization (outstanding debt versus total available credit) under 30%, or have someone with a high credit score authorize you as a user on a card (likely close family member or friend).
Once your cards are fully paid, keep the lines open. Your score will suffer if you close cards along the way. This is because two major factors in your credit score are how much credit you’re using (less is better) compared to how much is available to you (more is better), as well as the age of your accounts (older is better).
Clear Your Credit Report From Old Charged-Off Debts
Sometimes, old credit card accounts you never paid can come back to haunt you, even if the companies are no longer hassling you about it. They may decide instead to sell your debt to a collection agency who will go after payment and perhaps even tack on extra fees. All of this can affect your credit.
According to Orman, if your credit card debt was “charged off” more than seven years ago, the damaging information on that account should have been erased from your credit bureau file, and a collection agency cannot reenter the information. This process takes place under the Fair Credit Reporting Act (FCRA).
“Don’t initiate a new payment, as it would merely create new activity in your account and start the seven-year cycle over. Be very careful about doing this,” Orman said.
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