* This is a contributed article. The IBTimes news staff was not involved in the creation of this article and this content does not necessarily represent the views of IBTimes. When you buy through links on our site, we may earn an affiliate commission. Here are our T&C. For licensing please click here.

Credit cards could become a very useful financial tool when used in a sensible manner. The system of revolving credit allows you to take advantage of lucrative, redeemable points as well as pay for bills in case you don't have enough savings. In turn, you are required to pay at least the monthly minimum payment in the next billing cycle. This amount is often a percentage of your outstanding credit card balance that you need to pay to be in good standing with the credit card issuer.

People often end up securing multiple credit cards for different reasons like travel points, dining, or discounts on retail purchases, but they usually don't stop there. The convenience of credit cards and attractive points often make it very tempting to use them even when not required.

At the end of 2020, the average household credit card debt stood at $5,315, whereas a survey estimated that people are left with only $250 in disposable income after monthly bills and spending. Unfortunately, some people get caught up in late payments, which could lead to fees north of $30. A lot of people only manage to pay their monthly minimums, as well, while others choose to pay only the minimum even if they can clear a larger portion of the dues. Doing this could stretch out the vicious cycle for years and cause them to pay much more than they actually owe.

Here's an example:

Bankrate's credit card calculator estimates that for an outstanding credit card balance of $5,315 subjected to an interest rate of 20 percent, where monthly minimums are two percent of total dues, it could take over three decades to repay the loan. In the process, you could end up paying nearly $24,000 in total, a culmination of the high interest rates and minimum possible payments. Here, two percent of the assumed outstanding balance translates to a minimum monthly payment of $106.30.

The takeaway here is to find ways to repay your debt in larger chunks while saving money on sky-high interest rates without straining your monthly budget. Those who can make larger payments should do so towards high-interest credit cards and larger debts as early as possible. If your household is at the edge of financial wreck, creating a debt repayment strategy becomes all the more important.

Faster Credit Card Debt Repayment is all About Math

You can consult a financial expert or a friend who is good at math to chalk out a debt repayment strategy for all of your credit cards. When doing this, consider the interest rates and outstanding balances to gauge how much you can actually repay each month in order to become debt-free. After some calculations, you'll have a rough idea of the debt repayment timeline you are likely to face.

You could try out the Avalanche method of debt repayment, which requires you to pay maximum towards high interest cards with larger balances while paying minimum for the rest. The aim is to save money on interest while somewhat reducing the time you'll have to repay. While this approach could reduce the repayment tenure and save you money on interest in the long term, it would also be smart to find avenues to reduce your interest rates on existing loans.

In 2015, fintech founders Jason Brown and Jasper Platz launched a lightweight mobile app called Tally that incorporates artificial intelligence to create a smart debt repayment plan with the option to reroute your monthly payments through a low interest line of credit.

After downloading the app and signing up for free, you can add all of your credit cards onto the app and their proprietary technology will create a smart debt repayment plan with a projected debt-free debt if you make the suggested monthly payments. Tally usually employs the Avalanche method by default, but you also have the option to make adjustments if needed.

With the Tally+ membership, you could enjoy a low interest line of credit if your FICO credit score is above 660. The interest rate starts from 7.9 percent but will depend on your credit profile. When you accept the line of credit, your credit card balances will be transferred to your new low-interest line of credit and Tally will pay your monthly payments on your behalf. You will pay Tally in a one consolidated bill each month and save money on interest immediately.

Unlike debt consolidation companies, Tally doesn't contact your creditor or take over your credit cards completely. At the same time, the line of credit is revolving in nature, which means that you may use it whenever you want until the credit limit is exhausted.

In these financially unstable times, you might not be able to make the timely payments every month. This is when you could benefit from the Late Fees Protection program where Tally will make the payment for you even if you are late in paying Tally. This way, you won't incur any late fees and your credit score won't take a hit. Ideally, though, you should always try your best to pay on time, stay current on all of your accounts, and provide correct information to the best of your knowledge to avail of these features and save thousands of dollars over time.

Go Express With Tally

If you want to take things up a notch and reduce the debt payment tenure even more, you may opt for the Tally Express membership that gives you a larger credit line and appreciate your efforts to make timely payment with discount points. You also have the option to repay your debt at one go, and keep paying Tally at a lower interest rate without the fear of high fees or stretching your debt out for years.

These discount points on timely payments will be added to the principal amount, which could reduce the effective annual interest rate even further. Tally claims that making on-time payments for 12 consecutive months could reduce your effective annual interest rate on their line of credit up to a staggering four percent. This means saving more money while inching closer to being debt-free quicker. While the Express membership might incur some annual fees, it still seems like a good opportunity to save money, especially with the provision to reduce your interest rate based on your efforts and diligence. Bear in mind that you don't have to pay the annual fees upfront as it will be deducted directly from your line of credit.

Sign up for Tally for free on Android or iOS today.