Best Practices for Paying Down Small Business Credit Card Debt[yoast-breadcrumb]
Best Practices for Paying Down Small Business Credit Card Debt
If you’re a small business owner, you’ve probably had to use credit cards to cover expenses from time to time. But carrying a balance can get expensive with those high interest rates! Here are some tips to help you pay down your small business credit card debt.
Make a Plan
First things first – you need a plan to pay off your debt! Sit down and make a list of all your credit cards and the balances on each one. Then figure out how much money you can set aside each month to put toward your debt. Every little bit helps when you’re trying to get out of debt!
A budget can really help you find extra money to pay down debt. Track your income and expenses – you may be surprised where you can cut back, like eating out less or dropping unused subscriptions. Finding an extra $100 or $200 a month can make a big dent in your balances over time.
Pay Off Highest Interest Rates First
Now it’s time to decide which card to pay off first. The best strategy is usually to pay off the card with the highest interest rate first. This saves you the most money in interest charges over time. Create a payoff plan and focus on one card at a time until the balance hits zero.
You can use a debt payoff calculator to estimate how long it will take to pay off each card if you stick to your plan. Knocking out that high rate card first will keep more money in your pocket!
Consider Transferring Balances
Many credit cards offer 0% intro APR promotions on balance transfers. This can give you over a year to pay off your debt without accumulating more interest. Just make sure to check transfer fees – a 3% fee would be $30 for every $1,000 transferred.
Also be sure you can pay off the full amount before the 0% rate ends. If not, the remaining balance will start accumulating interest at a regular rate again. Transferring balances can save you a ton of money in interest, but make sure you have a payoff plan!
Ask for Lower Interest Rates
You may be able to call your credit card company and ask them to reduce your interest rate. They want to keep you as a customer, so it can’t hurt to ask! Let them know you’re trying to pay down your balance but the high rate makes it tough.
If they can’t budge on your rate, you can also ask about options like skipping a payment or changing your due date. Any flexibility helps when you’re trying to pay down debt.
Avoid Using the Cards
The best way to pay off credit card debt is to not accumulate more! Try to avoid using the cards that have balances, even for small purchases. The interest starts adding up immediately and makes the payoff take longer.
Put your cards away and use cash or debit until the balances are gone. And build an emergency fund so you don’t have to rely on credit when unexpected expenses come up.
Increase Your Income
Bringing in more money each month helps you pay off debt faster! Can you pick up a side gig like rideshare driving, tutoring, or freelance work in your spare time? Even an extra $200 or $300 a month makes a difference.
You could also try negotiating a raise at your current job. Show how you’ve taken on more responsibility and increased your value to the company. More income means you can accelerate your debt payoff.
Make Extra Payments
Whenever you come into extra money like a tax refund or bonus, make an extra payment on your credit card debt. Even $100 or $200 here and there helps you pay it off faster and saves on interest.
You can also make weekly or biweekly payments instead of monthly to accelerate your payoff. This works well if your income fluctuates and you can pay more some weeks than others. More frequent payments really add up!
Track Your Progress
As you start chipping away at your balances, make sure to track your progress. Celebrate each card you pay off completely! Seeing your hard work pay off will keep you motivated.
Some apps let you link your accounts to track your debt payoff progress. Or you can just create a simple spreadsheet to update each month. Watching those balances go down feels so good!
Get Help if Needed
If your debt feels completely overwhelming, don’t be afraid to seek professional help. Many non-profit credit counseling agencies offer free or low-cost services. They can help you manage your debt with strategies like debt management plans.
If your business is really struggling, you may need to close up shop. Consult an attorney about your options for dissolving the business legally. This can stop debt from piling up further.
Tackling credit card debt takes time and discipline, but it’s so worth it! Following these steps can help you pay it off faster, save money on interest, and get your finances back on track. Here’s to becoming debt-free!