April Lewis-Parks
Director of Education and Corporate Communications
Credit card debt can feel like an overwhelming burden, a constant source of stress that impacts your financial well-being and overall peace of mind. If you’re struggling to keep up with payments, battling high interest rates, or simply looking for a clear path to financial freedom, you’re not alone. This guide provides 15 actionable tips designed to help you regain control of your credit card debt and pave the way for a brighter financial future. From simple strategies like automating payments to exploring debt consolidation options, we’ll walk you through practical steps to manage and ultimately eliminate your credit card debt.
Tip No. 1: Always pay on time – never juggle bills
Paying on-time, everytime is the most important thing you can do to manage your credit card debt. If you miss a payment you can be hit with late fees and higher interest rates, which can lead to even more debt. A missed payment of 60 days or more significantly damages your credit report, the primary factor in your credit score. This can cause a substantial drop, making it difficult to obtain loans, credit cards, or even rent housing.
To make sure you never miss a deadline, automate your minimum payments. When possible, pay early or exceed the minimum amount. It’s also a smart idea to set a reminder either on your phone or calendar a few days before each due date to make sure you have enough funds in your account to cover the minimum. If you anticipate difficulty meeting a payment, contact your creditor or a credit counselor immediately. They may be able to help you find a solution. Addressing the issue head-on through communication can stop a financial downward spiral.
Having trouble managing debt on your own? We can help. Talk to a certified counselor to customize a debt management plan.
Tip No. 2: Talk to your creditors to negotiate lower rates
The first step to easing your debt burden is minimizing the interest rates applied to your balances. Lower rates reduce the overall cost of repayment and accelerate your path to zero, allowing you to focus on paying down the principal—the actual debt you owe. Don’t hesitate to call your creditors and politely request a lower interest rate on each of your accounts. Many credit card companies are open to negotiation, especially if you have a solid payment history. Explain your situation, mention competitor offers, or express your intent to transfer your balance to gain leverage. If they agree, ensure the new rate and terms are confirmed in writing. A reduced interest rate directly translates to less money spent on interest, enabling you to tackle your principal balance more effectively.
If you’re looking for a do-it-yourself method, or aren’t ready to seek professional debt help just yet, try a debt reduction plan. This means focusing as much cash as possible on paying off one credit card debt at a time.
Two popular strategies are the snowball and avalanche methods. The snowball method involves paying off the smallest debt first, regardless of interest rate. This method helps you see progress quickly and can help you build momentum towards paying off your other debts. The avalanche method involves paying off the debt with the highest interest rate first. This method saves you the most money. Choose the method that works best for you.
Use a debt calculator to see how long it will take to pay off your debt. Compare making minimum payments to making bigger payments. If it will take you more than five years, you might want to look into debt relief programs. However, if you’re determined to handle it on your own, this focused, one-card-at-a-time method is a great place to start.
Tip No. 4: Consider, but don’t abuse balance transfers
Another DIY method for getting out of credit card debt is using balance transfer credit cards. They involve moving high-interest balances from one or more credit cards to a new card with a lower introductory APR, often 0%.This can provide a temporary window to pay down your debt without accruing further interest. The length of the introductory period varies based on your credit score, usually from 6-18 months. Note that you usually need good to excellent credit to get these cards with a favorable interest rate. If your credit is bad, this may not be a suitable plan for you.
It’s important to use balance transfers strategically. There are usually balance transfer fees and you need to be sure you have a solid plan to pay off the transferred balance before the introductory period ends, as interest rates will typically jump significantly afterward. So, calculate carefully to transfer an amount of debt you can reasonably expect to pay off before the introductory period ends.
If you do a balance transfer for only a portion of your debt, make this card the first one that you focus on eliminating. It will save you money since the payments are completely interest-free.
Tip No. 5: Cut back on discretionary expenses
Debt reduction and balance transfer payoffs are more effective with more cash. So, the more you can cut back on other expenses, the more cash flow you have to get out of debt. Creating a budget is a great way to track and find places to cut back. Here are a places you can try to cut back:
Review your streaming services: Explore whether you can cancel, consolidate or temporarily pause some entertainment subscriptions.
Evaluate your services: Consider if there are tasks you can handle yourself, such as landscaping or cleaning, to free up some funds.
Embrace home-cooked meals: Reducing dining out and bringing lunch to work can make a noticeable difference.
Explore at-home fitness: Consider home workouts as an alternative to a gym membership.
Remember, every little bit helps in reaching your financial goals faster. However, don’t do the financial equivalent of a crash diet; it can lead to spending splurges. Always aim to make a plan that you can maintain.
Tip No. 6: Don’t neglect your savings
One thing that you shouldn’t cut out to eliminate debt is savings. Unexpected expenses, like car repairs or medical bills, can derail your progress and potentially push you further into debt if you don’t have a safety net. Aim to strike a balance. Ideally, you want to save about 5-10% of your take-home income per month. If that isn’t doable, even smaller, yet consistent contributions to an emergency savings account can make a difference. Otherwise, living paycheck-to-paycheck puts you one emergency or unexpected expense away from more debt.
You shouldn’t have to spend every penny to get out of debt effectively; if you have to, it means you need another solution.
Tip No. 7: Increase payments as you free up cash flow
Each time you eliminate a credit card debt, you eliminate that bill. That gives you more cash to pay off the next debt. Although you can use the freed-up cash to reinstate discretionary expenses or relax your need to budget, it’s better to roll it into paying off your debts.
Stay committed to repaying your debts and knocking out your balances.
Tip No. 8: Look into debt consolidation loan repayment
Beyond balance transfers, a debt consolidation loan offers another way to simplify your finances and potentially lower your interest rates. This involves taking out a low-interest personal loan to pay off your existing credit card balances, or other unsecured debts, leaving only the loan to repay.
Like balance transfer cards, this method really only works for those with good to excellent credit because that’s who can qualify for the low interest rates. Still, it’s worth going online and comparing loan interest rates, fees, and comparing the estimated cost to other options. Always compare the time to pay off the loan and the total cost (including interest charges and fees). This takes some calculation, but it’s essential to get the most cost-efficient and timely repayment plan possible.
Tip No. 9: Stop charging until you pay back what you owe
The last thing you need is more debt to repay while you’re in the process of paying it off. That means that you must commit to stop charging while you focus on managing debt. You don’t have to swear off credit cards forever, but you at least need to get back to zero first. It’s the only way to get back to the point where you can use credit interest-free.
Even if you use balance transfers or consolidation loans, resist the urge to charge until you pay the debt off. Otherwise, you run the risk of running up new balances and making your debt problem worse instead of better. Your goal was to reach zero so you can regain stability, not to fall back even further into debt.
Tip No. 10: Deal with the service provider for medical bills
Besides credit card debt, you may have unpaid medical bills to repay, too. Thanks the a new ruling from the Consumer Financial Protection Bureau (CFPB), medical debts in collections will no longer be included on credit reports. This means they won’t affect your credit score. However, you shouldn’t ignore these debts. There may still be consequences for not paying them such as legal action and liens. So, you need to incorporate medical debt repayment into any plan to manage debt.
Tip No. 11: Never turn to alternative financing solutions (AFS)
Alternative finance solutions refer to any nontraditional lending source; it’s basically any no-credit-check loans, like payday loans. These financing options offer instant approval with no underwriting, so you can get approved even if you already have more debt than you can handle. The problem is that the finance charges are high – usually $30 for every $100 financed. In addition, the interest rates can get extremely high, as in above 300%.
Although you may be tempted to use AFS if you can’t get other financing, don’t do it! Payday loans and other AFS options only make a bad situation with debt worse. They can seem like a good idea to fill a cash need quickly. However, when you’re already struggling to make ends meet, there’s little chance you’ll pay the loan back before those notoriously high finance charges and interest rates kick in.
Tip No. 12: Avoid actions that leave you worse off
What you don’t want to do while working to manage debt is to take steps that put you in a weaker financial position than when you started. There are several ways you can pay off credit card debt that hurt your overall financial outlook.
Don’t dip into your 401(k) or another retirement account. If you have a 401(k) through your employer or an IRA privately, don’t tap it to pay off your credit card debt. That money needs to stay put to grow so you have financial stability later in life. Using your funds now leads to early withdrawal penalties. And even if you put the money back after you recover, you lost that time for growth. It’s usually not worth the debt elimination benefit for the savings you lose.
Don’t covert unsecured debt to secured debt with a home equity loan. A home equity loan allows you to borrow against the equity built up in your home; that’s the property value minus the remaining balance on your mortgage. Some people use this option because it’s easier to get a low interest rate with a weaker credit score. However, that’s because it uses your home as collateral. If you start to miss the payments on this loan, the bank can foreclose and take your house. It’s just not worth the added risk.
Tip No. 13: Don’t wait to decide a solution isn’t working
If you try something and you see that it’s not working, don’t wait to try something else. Remember, the longer you procrastinate and delay paying what you owe, the more money you waste on interest charges and the deeper you go into debt. Time is not on your side when you have debt to pay.
If you try a debt solution and it doesn’t provide the benefits you need, don’t wait to try something else. If a balance transfer introductory period is about to end and you still have a balance, look at consolidation loans. By the same token, if you can’t keep up with loan payments, don’t wait for default to seek help.
Tip No. 14: Don’t let emotion keep you from asking for help
For the most part, people usually prefer to solve debt problems on their own. However, that’s not always easily done. In many cases, reaching out for professional assistance is faster, easier and more cost-effective than solving debt problems on your own. So, if you exhaust all the tips above and you still can’t find an effective way to pay back what you owe, ask for help.
Don’t let pride, feelings of embarrassment at your situation, or mistrust of outsider prevent you from getting the help you need. Just make sure that the company you work with is reputable, well-rate, with a proven record of help.
One of the most effective solutions people use if they can’t solve debt problems on their own is consumer credit counseling. They will review your options with you and help you understand the pros and cons of different debt relief strategies. They can also offer you tools, resources, and potentially enroll you in a debt management program to simplify your payments.
Nonprofit consumer credit counseling helps people find better ways of eliminating debt. Learn how the process works so you can see if it’s worth it to reach out for help
Credit counseling doesn’t have to be so confusing. Here’s a super-easy 60-second explanation of how credit counseling works.
If you’re facing financial distress because of debt, you have a few options when it comes to finding relief. Credit counseling helps you zero in on the right option to use in your situation. That way, you can rest easy knowing your debt solution is actually going to work.
You start the process with a free debt evaluation to see where you stand. A certified credit counselor looks at your debts, budget and credit score to help you decide which solution will work for you.
If a debt management program ends up being your best option, then your credit counselor can also help you enroll in the program. They can tell you how much you’ll pay on the program and how long it should take versus what it would typically take on your own.
So if you’re struggling to get ahead of your debt, we can help! Call Consolidated Credit today for a free debt evaluation with a certified credit counselor. Together, we can find the best solution so you can finally beat your problems with debt.
Tip No. 15: Make sure to check your credit once you’re done
No matter what your plan to manage debt looks like once you have it crafted, always check your credit once it’s done. Financial distress is usually not easy on your credit score, but getting out of debt is. That means that you need to check your credit report once you finish to make sure it reflects your new debt-free status.
Check to make sure all account statuses are paid and current
Make sure any missed payments were actually missed
Review collection accounts to see that they were either removed or listed as paid; also check to make sure you didn’t miss anything that slipped into collections.
Basically, you’re looking for mistakes and errors that could still hurt your credit score. If you find any, dispute them to have them removed. Then, start rebuilding your credit if the period of hardship led to any damage. You can check your credit report at annualcreditreport.com.
If you find mistakes or errors in your credit report that you need to dispute, use these free credit repair instructions to repair your credit so you can maximi…
Conquering credit card debt requires dedication, discipline, and a willingness to adapt your strategies as needed. It’s a journey that demands consistent effort, but the rewards—financial stability and peace of mind—are well worth it. Remember, managing debt isn’t just about numbers; it’s about taking control of your financial future. By implementing the tips outlined in this guide, you’ll be equipped to make informed decisions, negotiate effectively, and ultimately achieve your debt-free goals. Don’t be afraid to seek professional help when needed, and always remember to celebrate your progress along the way. With persistence and a strategic approach, you can break free from the cycle of debt and build a solid foundation for long-term financial success.
Having trouble managing debt on your own? Talk to a certified credit counselor to find a better way.
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