While you’re paying off debts, put efforts to change the behaviors that led you into debt.
Paying off debt is an important priority. Once it’s gone, you’ll stop making interest payments, you’ll be able to save more for major milestones, and you’ll feel more in control of your money and your life.
But it’s not always easy: making payments on time, choosing the right debt to pay off first, and juggling cards and loans can complicate the process. Let’s look at a few common mistakes to avoid.
Commit to a debt-free goal and make a plan to get there. Start with a comprehensive list of your debts, noting the amount of each and your current interest payments.
Then consider one of the most common methods for clearing debt:
Pay off the card with the lowest balance first. When the first card is paid off, use that card’s payments to help pay off the next one with the lowest balance. Keep going like that, building your payments and paying off cards one after another. You’ll build confidence and momentum seeing cards clear one by one.
2. Avalanche method:
Focus on the card or loan with the biggest interest payment. It might be the highest interest rate or hold the highest balance. But focusing on the one charging you the most interest will start saving you money right away. You might not pay off cards as quickly as the snowball method, but you’ll pay less in interest charges in the long run.
Choose the method that makes sense for you. Then stick with it. With either method, paying off debt takes time. Be patient and celebrate small achievements as they come.
Even when you’re focused on debts, don’t forget the reasons you built up debt in the first place. Remember why and how you got into debt, and start changing those behaviors now.
Here are two common habits that often lead to debt:
1. Spending beyond your means
Credit cards are great for everyday convenience. They’re an easy way to buy things safely online and in person. But they shouldn’t be used for purchases you can’t afford. Use cards instead of cash when it makes sense for you, but don’t rely on them for spending beyond your budget.
2. Continuing to use cards with high interest rates
Credit cards can be a tough habit to kick. While you’re focused on paying them off, stop using the card that costs you the most in interest payments. Set it aside, take it out of your wallet, and move autopayments to other, less-expensive cards.
4 smart ways to pay off credit card debts.
Securing a personal loan to pay off debt only works if one factor is in place: the loan needs to offer a lower APR than the cards you’re paying off. Using a loan only makes sense if you can transfer a balance from a high-interest credit card to a loan that costs you less.
The same math and logic applies to balance transfer cards. If you’re moving a balance from one card to another with the aim of paying it off, make sure the new card offers a lower APR.
Keep in mind that you’re still paying the debt you owe. But with the right loan or transfer, you’re saving money on interest charges and probably buying more time to pay off the debt.
Tracking your debt payments helps you stay motivated. Seeing a card wiped clear or watching your interest payments fall -- they can both be a big boost, adding new momentum.
Tracking can also signal when your strategy isn’t working. You may find paying off a card with the lowest balance first costs you more than expected, as other cards with higher interest continue to rack up charges.
While you pay off your debts, keep building your savings too. Make saving a habit, part of your monthly budget, and you’ll stay on track for future goals.
Paying off debt shouldn’t bring everything to a halt. Adjust your budget, but keep making room for nonessentials, the affordable, even fun things you regularly prioritize.
Your personal Bright Plan is built to keep you on track. Once you connect your cards and bank accounts, your Bright Plan analyzes your spending habits and makes payments for you - based on your goals, the cards costing you the most money and what you can afford. Your Bright Plan will ensure you never pay another late fee, and we’ll make sure you’re paying less in interest charges.
Your Bright Plan even adjusts when your income or spending habits shift, adapting your payments to what you can afford.
You’re always in control, setting your own goals, and you can always see your progress in the Bright app.
Avinash is an Engineering graduate from IISc and BITS-Pilani. He is an experienced engineer and big data architect.