Money Life Inspiration ASK FROST What’s the best strategy for paying down credit card debt? March 8, 2021 Dear Frost, The holidays always come with some challenges and this year was no exception. While the number of people present was much smaller due to the pandemic (only my partner, two children and I celebrated together), we spent well more than in the past on gifts for each other and for all of the relatives we couldn’t see in person. The result is credit card debt that will take a few months to pay off. Any suggestions as to how to approach this? —Get Debt-Free Dear Debt-Free, We all have a credit card story—mine was in college, where I opened every credit card that was offered to me, just for the free T-shirt! Life lessons, right? The best lessons come from someone who has lived through something similar and is able to give advice from experience, so here I am to do just that. Get Organized It may be tempting to rush into things before interest starts adding up, but it’s worth taking the time to develop a plan. Write out the details of what you’re dealing with so you can see it all on paper. For example, if you have three cards, jot down the balance, term and interest rate for each card. It will make it easier to think through what you’ve got and formulate a strategy for taking down the debt step by step. Next, get real friendly with your budget. If you don't know how much cash flow you truly have, then you can’t get into the details of what you’re working with to pay down your debt. Money matters are all in the details. Find Extra Funds OK, now’s the time to sort out the “how.” Now that you know how much cash you have, you can decide what to do with it. This is your chance to really skinny up your budget. A lot of people don’t take the time to pull apart their discretionary spending, but I encourage you to really look hard at what’s optional and what’s a fixed expense. Sure, your car and mortgage payments are fixed, but you can do something about how many streaming services you have, what and where you’re eating (maybe stop buying organic for a while), etc. A huge opportunity comes with putting a little extra effort behind shopping around for competitive rates on some of the things in your “must-have” column. For example, your cell phone: Can you downgrade your data plan? Can you switch carriers to decrease your monthly bill? Shop around to free up some extra cash to pay down these credit card bills. Strategic Options Typically, financial professionals will recommend paying down the card with the highest interest rate first, since over time you’ll be paying the most there. But that’s not the only way. We know that money matters are emotional as much as they are practical. So I always tell my clients: Look for what’s going to build your momentum. When you pay something off, it builds your confidence. So it might be best for you to focus on the card with the lower balance first if it means you’ll remove that payment altogether for next month. Look for what’s going to build your momentum. When you pay something off, it builds your confidence. Some other ways to gain momentum on paying down debt on multiple cards are to look into consolidation options, take advantage of transfer offers that bring your interest rates way down, or even try calling the card company and asking for some help in lowering your monthly payments. If you’ve been a good customer of theirs for a length of time, you might be surprised at what they’ll offer you to keep you as a customer. For example, maybe you didn’t fit into the algorithm to be sent a 0% APR offer, but you might be eligible for a 1% offer that you’d never know about if you didn’t pick up the phone and ask. For all these options, be sure you’re aware of the fine print. Ask for details or read through contracts looking for credit rating requirements, transfer fees and the timing of when the introductory APR will end. Be sure you’ll be able to pay it off in that timeframe—set yourself a reminder in your calendar, your watch, whatever you’re using—you have to follow through on your commitment, or you’ll end up paying way more in the long run. Take Care of Yourself At the end of the day, the most important thing to remember when approaching debt is to do it in a way that fits your financial personality. It’s not going to be the same for everyone, and that’s OK. At Frost, we’re always here to be a sounding board if you need it. Even if you don’t bank with us, or if we don’t have a product that can help you, we have bankers who will always answer your call and offer some new ways to think about your financial goals. WRITTEN BY Rebecka Holt Rebecka Holt is an executive vice president and director of Central Credit and Business Banking at Frost Bank. She’s responsible for supporting the bank’s credit and lending teams that provide loans of up to $1 million for Frost’s small business customers. Read More SHARE THIS ADVICE WITH YOUR FRIENDS AND FAMILY MORE FROM ASK FROST Browse all articles Research shows those who aren’t afraid to talk about their money questions are twice as likely to have better financial health than those who keep quiet. So, we’re collecting your questions and sharing sound advice from our bankers. Do you have advice for starting a small business? March 4, 2021 What’s one financial resolution I should work on in 2021? December 21, 2020 What’s the best way to stick to a holiday budget? December 14, 2020 WE’RE HERE TO HELP Visit with a Frost banker for more immediate guidance on your financial life. 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