How to Easily Find Money to Pay Down Credit Card Debt
You Are Probably Sitting on Money to Repay Debt and Don't Even Know It
Are you struggling to come up with enough money to pay more than the minimum on your credit card debt? At times like those, credit card debt can feel like a vicious cycle that is forcing you to use credit on everyday expenses just to scrape up enough cash to pay the minimum payment on the debt you've already accumulated. While it can certainly seem as if there is never enough money to go around, you might be surprised where you can find a few extra dollars every month to apply towards that debt and accelerate the payoff. Here are some possible options:
Borrow From or Cash Out of a Cash Value Life Insurance Policy
Do you have a small cash value life insurance policy that’s collecting dust, or even worse, costing you money each year? If so, you may want to consider borrowing from the cash value or possibly even canceling the policy altogether.
Cash value life insurance for younger people is almost always a bad investment. In some cases, your parents may have taken out a policy on you when you were young, or maybe you were sold a policy by an insurance agency. Either way, you likely only have a minimal death benefit and a cash value that is earning very little interest. If you’re paying 10, 20, or 30 percent on your credit card debt each year, you’re probably doing more harm than good by keeping the policy. Once you get caught up on your debts, you can look into a much more affordable term life policy.
Sell Non-Retirement Investments
If you have some investments in regular taxable accounts, either in the way of savings bonds, CDs, or even mutual funds or stock, it may make sense to sell some of those investments to apply towards your debt. While any gains on these investments are taxable as capital gains this year, compare the total amount of tax you’ll pay compared to the amount you’ll save by reducing the debt and paying less in high credit card interest. You may find that you're better off paying the taxes on the capital gains and reallocating that cash towards your debt. Here's an easy example:
If you invested $1,000 in a mutual fund two years ago and it is now worth $1,500, that means you have a $500 gain. But since you held the investment for over a year, it is subject to the more favorable long-term capital gains tax, which is currently 15%. That means if you cashed out the $1,500, you’d only owe $75 in taxes. That would leave you with $1,425 to apply towards your credit card debt. If your credit card has an interest rate over 15%, you’ll be saving some money and getting that debt paid off even sooner, which saves even more in interest down the road.
Sell Some Personal Items
Most people have a lot of stuff that collects dust in the garage or the basement that is no longer being used. While we always think we’ll need that old guitar or nostalgic video game system, they are probably just taking up space.
Consider having a yard sale, or even placing items for sale on eBay or on Craigslist to make some extra money. While selling just one or two items for $20 won’t work miracles on your debt, selling a few dozen items for $20 just might. Even generating a few extra hundred dollars will put a dent in your debt, and you’ll also be cleaning up your house or apartment at the same time!
A monthly subscription is a serious drain on anyone’s budget. Each subscription itself seems small and very affordable. $5 per month here; $20 per month there. Alone they may not be a big deal, but while anyone subscription may not seem like much, when you have ten or more of these subscriptions each month, it can cost you a few hundred dollars a month. Canceling, or even just downgrading, a handful of your monthly subscriptions can free up a nice chunk of change each month.
Are you paying extra each month for a 10G mobile data plan when you never go over 6G? Are you receiving the weekly edition of the newspaper when you only have time to read it on the weekends? Do you receive magazines that you don’t get much value out of, or could browse online? These are all items you can downgrade or eliminate and free up money each month to apply towards debt.
Don’t Stop Here - Get Creative
These are just a few ideas, but they should give you something to think about as to where you can save money in your life. You don’t need to have a large pile of money sitting around to put a dent in your debt. Just being able to find ten ways to save $10 each month can cut your debt repayment plan by months or even a few years, and save you hundreds or thousands in interest over the long run.
So, where can you find money to pay off your credit card debt?