Credit card debt continues to grow in the US. The average credit card debt per each American household amounts to roughly $6,829 according to a 2018 Nerdwallet study conducted by The Harris Poll. Nerdwallet also reported that 1 in 11 Americans have little hope to pay off these balances because their credit card debt continues to inch up.
Don’t be part of these statistics and instead, learn how to get out of credit card debt. We’ve provided proven techniques to pay off credit card balances and start building your financial performance on a clean slate. You’ll discover the importance of implementing your credit card debt-reduction plan as soon as possible.
What are the consequences of credit card debt?
When you borrow more than you can repay, you jeopardize more than your finances. Having debt hanging over your head causes undue stress and depression. Not only that, credit card companies add interest and late-fee charges making it increasingly difficult to pay off balances.
Unless you make timely payments to creditors, you risk lowering your credit score. When you don’t pay your debt, your overdue accounts may be forwarded to a collection agency. Ultimately, they could freeze your bank accounts or take possession of your vehicles and other assets. When you ruin your credit, there’s a likelihood you won’t qualify to rent a home and get loan financing. You may have a harder time getting a job since some employers review your credit history as part of the hiring process.
How to Get Out of Credit Card Debt – 7 Proven Techniques
Learning how to get out of credit card debt isn’t hard when you have outlined steps to follow. By completing these techniques, you’ll be well on your way to reducing and eliminating credit card debt. When you do, it’s okay to use your credit cards for purchases as long as you pay off the balances each month.
- Pay off cards with higher interest rates: First, if you don’t know the interest rate you pay on your credit cards, find out. For example, let’s say you have balances on four credit cards. Pay the minimum balance on three of those cards and make the largest payment on the one left with the highest interest rate. Once you pay off the highest-interest card, use the same procedure to pay off the remaining three cards.
- Increase your payment amount: Withdraw money from a savings account or use any extra cash you have to make more than the required minimum payments. If possible, try to double or triple the minimum payment amount so more money goes toward the principal balance.
- Make more payments: Did you know in the long run you pay less interest when you make more payments each month? That’s because credit card companies charge interest on your average daily balance. You don’t need to increase your payment, just make two payments that total what you’d normally pay once a month. You’ll save interest which lowers the total amount owed.
- Look for 0% credit cards: Some credit card companies offer 0% introductory annual percentage rates (APR) for 15 months or more on balance transfers. Therefore, payments reduce the balance without incurring additional interest. It’s important to track when the introductory rate expires since subsequent variable rates can be as high as 25% or more.
- Settle your debt: You can negotiate a lump-sum settlement as long as you have the money to pay off the debt. Keep in mind, if a creditor forgives $600 or more of the debt, they normally send a 1099-C to the IRS which means you may pay tax on that amount as income. Another way to settle your debt is to work out a different payment arrangement to lower your interest rate, reduce the minimum payment amount or ask a creditor to stop assessing late fees. Keep making payments until you work out a settlement arrangement. Otherwise, you will adversely affect your credit history.
- Stop using credit cards for purchases: Since your goal is to pay off the cards, you’ll have a harder time doing so if you keep making purchases. Store your credit cards safely away so you don’t use them until you pay off the balances.
- Consider debt consolidation: By getting one loan, you can pay off all the balances owed on credit cards. Most times, loans have a lower interest rate than what you pay credit card companies. Likewise, the payment amount should be less than the combined total you pay to multiple creditors. It’s important during the loan term that you don’t run up new balances on your credit cards or use the loan proceeds to go on a shopping spree. You could quickly get back in the same financial situation you’re trying to get out of.
In addition to implementing these seven techniques, we encourage you to read 10 Strategies to Pay Off Debt Quickly which provides smart tips to become debt-free.
Camino Financial: Business Loans to Pay Off Your Credit Cards
Your first thought when thinking about how to get out of credit card debt is probably why add to your existing debt by getting a loan. Using a business loan as a debt consolidation loan doesn’t make sense until you realize the benefits you’ll receive.
At Camino Financial we are very flexible in how you can use the loan funds, meaning you can use one of our business loans to pay off a credit card that has been used for business purposes. Our loans have better terms than a credit card. Once you’re approved for financing, you can pay off your credit card debt immediately. Because you pay a fixed amount for the duration of the loan, you stay on top of debt and can pay off the loan early without paying a penalty.
After 9 months of timely payments, it’s possible to reduce your interest rate so more of your payment goes toward your loan balance. You control your debt which is entirely different than having credit card debt control you. We invite you to request a loan quote and get out of credit card debt today.