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How To Climb Out Of Credit Card Debt

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Best For Those Whose Debt Has Become Unmanageable

How to climb out of credit card debt

Seeking debt relief involves hiring a third party to negotiate with your creditors on your behalf. Debt relief typically comes in one of three forms: a debt management plan, debt settlement, or bankruptcy. With these methods, the third party can help you negotiate repayment, which may be less than the total amount that you owe in some cases.

Solution : Balance Transfer Credit Card

Interest-free payments are the fastest way to pay off credit card debt.

If 100% of every payment you make goes to eliminating principal, you can pay off credit card debt fast. The easiest way to get interest-free payments is to use a balance transfer credit card.

This will give you 0% APR for 6 to 18 months after you open the card. However, once the promotion period ends, regular interest charges will apply to whatever balance you have left. Only transfer as much debt as you can afford to pay off during the interest-free period.

Ideal for: $5,000 or less in credit card debt

Balance transfers are usually the best option in this situation. As long as you have good credit, you can qualify for a card that offers 0% APR for at least 12 months. That gives you six months to pay off your debt interest free.

To eliminate a $5,000 transferred balance in full before the regular APR for balance transfers kicks in, youd need payments of about $417.

Stop Using Your Credit Card For Everyday Spending

If your debt has become unmanageable, avoid adding extra fuel to the fire. If you keep making new purchases, it will be much more challenging to accelerate your debt repayment.

So remove the temptation! Put your credit card in a drawer or another place it isnt readily accessible. Then, use your debit card for everyday transactions. This way, youll avoid worsening your already troubled finances.

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What Is A Good Credit Card Apr

The best way to identify if the APR on your credit card is good or not is to check the average credit card APR and compare it with what your credit card is offering. Currently, the national average is around 16%. Not sure what your interest rate is? Read more in this article on how to find the interest rate for your credit cards.

Ways To Get Out Of Debt

You can climb out of credit card debt with a 0% intro period balance ...

12 Min Read | Apr 19, 2022

When youre in debt, it can be easy to pretend everything is fine. Until one day . . . it catches up with you. Yepdebt is dumb. Real dumb. And the only way to get rid of it is by facing it head on. As much as youd rather bury your head in the sand and pretend its not there, it only stays hidden for so long. So, if youre wondering how to get out of debt , youve come to the right place. Weve got 27 ideas that will help you pay off debt faster.

But before we share those tips, we need to get back to the basics.

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Negotiate With Your Creditors

If you are experiencing unusual financial hardship, you might be able to negotiate with your creditors. Coping with debt when you are unemployed, for example, is exceptionally hard, but your creditors are familiar with these kinds of difficult situations and might be able to make your life a little bit easier.

Many banks and lenders offer hardship programs designed to assist people who are struggling with their debts. Talk to your creditors and see if you can negotiate a lower monthly payment, a lower interest rate or a forbearance program that will let you temporarily suspend your debt payments. Your creditors may also be able to recommend credit counseling firms or other resources that can help you learn how to manage your debt during tough times.

Consider A Balance Transfer

When it comes to credit card debt, the high interest rates are a big challenge to rapid repayment. So anything you can do to reduce your interest rate will make your repayment faster.

One of the simpler ways to reduce your interest rate is to transfer your credit card balance to another credit card with 0% APR. By eliminating the interest you have to pay, youll greatly simplify your debt repayment and potentially save a lot of money.

However, there are some caveats to be aware of.

First, youll almost certainly have to pay a balance transfer fee. Typically, this is around 3% of the balance youre transferring. So, for instance, if you transfer a $5,000 balance to a new card, you can expect to pay $150.

Next, you should know that the 0% APR balance transfer promotions are typically time-limited. Some cards will give you as many as 18 months before they start charging interest, while others will give as little as 6 months. Therefore, youll need to balance your potential interest savings over that time against the balance transfer fee.

So how do you decide if its worth it to do a balance transfer? You just need to do a bit of math. Lets return to the same example weve been using:

  • Current balance: $5,000
  • 20%
  • Minimum payment: $35

And now, lets say you have the opportunity to transfer that balance to a card with 0% APR on balance transfers for 12 months. The card charges a 3% fee for the transfer. Is it worth it?

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Be Obsessed With Your Goal

Managing your finances is more about psychology than math. The math is easy to figure out. The hard part is maintaining the discipline required to climb out of the debt hole. Paying off $16,000 in credit card debt is no easy task. It will require sacrifice and for some people a complete change in lifestyle. It will be tempting to quit when things get hard. The only way to guarantee you achieve your goal of living debt-free is to become obsessed with making that goal a reality.

In his Reddit post, the new father recommends putting sticky notes around your house and office with $0.00 written on them. This serves as a constant reminder of your goal having a credit card balance of $0.00.

Solution : Credit Card Debt Consolidation

Credit card debts climb going into 2022

If the minimum payment requirements for your credit card debts are too high, consolidate!

Debt consolidation loans often lower your monthly payments. However, since it also reduces your interest rates, you can get out of debt faster even though you pay less.

If you use a debt consolidation loan, then the term you choose determines the monthly payment requirement. Choosing a longer term will lower the monthly payment.

Most lenders will let you go up to a 48- or 60-month term on a consolidation loan. This can significantly cut your monthly payment requirements.

Ideal for: Up to $25,000 in credit card debt

If your total monthly credit card payments are too high prior to consolidation, you may need to opt for a personal loan with a longer term.

In this case, a 3 or 4-year term may be the best solution to give you lower monthly payments, while still allowing you to get out of debt faster. Its also worth noting that this is only the best solution if you have good credit .

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Review Your Current Credit Card Balances And Interest Rates

You need to assess your current situation before you do a balance transfer.

You have to check your current balances and interest rates. The interest rates on your credit card are typically expressed as APR. You will need this information so you can choose the best card for your balance transfer.

Moreover, find a balance transfer card with a lower interest rate than what youre already paying.

How Can I Improve My Credit Score

One of the easiest ways to improve your credit score is to pay your bills on time. Credit history plays an important role in your overall credit score so the more positive history you are able to show, the better. Read about more strategies for achieving a good credit score in this article.

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Home Equity Loans Or Lines Of Credit

Similar to loans earmarked for debt consolidation, home equity loans or home equity lines of credit can allow you to put your loan towards existing credit card debt. Given that these loans are secured by your home, you can often have higher loan limits than a personal loan. Of course, the risk involved is that if you are unable to regularly meet the payment terms of your home equity loan or line of credit, the bank can foreclose on your home.

Like a debt consolidation loan, it can be attractive to wipe out your credit card debt all at once through a home equity loan. But, as you take on your monthly loan payment, take care to monitor and limit any of your credit card expenses to be certain that you don’t build another debt that you can’t repay.

Stay On Target And Focused

You can climb out of credit card debt with a 0% intro period balance ...

Welcome to the next hardest step. Paying down debt is not easy and it will usually take some time. We all dont have the luxuries to just pay off our debt in a couple of months. It will most likely take years. It took me 4 years to pay off my credit card and consumer debt . It took longer than some, because we saved along with paying down the debt. We worked hard to make sure we stayed on target. There are so many temptations that occur in everyday life, but you have to understand your goal.

Do you want to be buried in debt or would you rather have financial freedom? I chose financial freedom. Dont be afraid to tell your friends or family that you cant do something because you cant afford it. You may not want to irritate your friends or family, but these are necessary changes. If they love and respect you , they will understand. Paying off debt is about you becoming a better person and more financially stable. You have to do what ever you can to stay on target. I made some simple changes along with harder changes to make sure I stayed on my debt payment plan.

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Reduce Spending By Tightening Your Budget

Nobody likes to hear this, but one of the easiest ways to quickly pay off debt is to throw more money at it every month.This means finding new ways to save, like canceling your cable TV or reducing the number of nights you order takeout. Anytime you can make more than the minimum payment on your credit card bills, youre one step closer to being debt-free.

Get Your Spending Under Control

Sometimes people get into credit card debt due to unexpected medical or emergency expenses. Other times, the source of debt is chronic overspending, which often means youre spending more than youre saving or more than you have in your account. To gain full insight into how much youre spending, making a reasonable budget is the next best step toward alleviating that debt.

Matt Kelly, owner of Momentum: Personal Finance Coaching in Durango, Colorado, recommends that your budget account for the following:

  • Basic necessities: rent/mortgage, utilities, groceries and gasoline
  • Obligations: minimum payments on credit cards and other debt
  • Nice-to-haves: restaurants, coffee and entertainment costs
  • Irregular recurring expenses: insurance, car repairs, tires, haircuts, vitamins, toiletries, vet bills, holiday gifts, travel, weddings and gifts

Its the last category that often trips people up and becomes the source of credit card debt, Kelly says. These little and not-so-little expenses go onto the card and are hard to pay off.

Once youve put your expenses down on paper or entered them into a spreadsheet, go through each item and find ways to free up enough money each month to pay off all your debts in 12 to 18 months, he says.

  • Who this strategy is good for: Anyone lacking a sufficient budget.

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Debt Snowball Vs Avalanche

It could be that your higher balance card also happens to be the one with the lower interest rate, to which we say, lucky you! In some cases, there might not be that much of a difference between the avalanche and snowball method. Use a free debt avalanche/snowball calculator to see if there is a big discrepancy between these payment strategies and decide which one is right for you.

How To Climb Out Of Credit Card Debt

Gephardt Busts Inflation: How balance transfer credit cards can help you climb out of debt

Everyone knows the financially responsible way to use credit cards is to pay off the balance each month to avoid paying high interest rates and incurring damaging debt over time. Everyone also knows you should eat your vegetables, but there’s a huge gap between knowledge and action.

If you’re one of the people who make up this sobering statistic, you know the frustration andin some casespanic that come with overdue bills. There’s light at the end of the tunnel, however. The path to financial solvency starts with reviewing the tried-and-true options at your disposal for paying off your debt and determining which payoff method is right for you.

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How We Paid Off $50000 Of Credit Card Debt

There are many others that might have more or less credit card debt, but we all got into it for one reason. We spent way more than we made. Simple and to the point. There might be many reasons why we get into debt, but it all boils down to spending more than one makes. It doesnt matter if it is due to compulsive spending, medical bills, emergencies, or anything else. If you spend more than you make, then you will be in debt.

I have written a few times about why we got into debt. There were many reasons, but it all boiled down to spending more than we were bringing in. I built a business, funded it with credit cards, bought a Jetski, and funded vacations on credit. The business failed and the Jetski broke down. All I had to show for those were the monthly payments of debt.

I loved credit and it loved me. Unfortunately, our relationship was destined to fail. Credit cards allowed me to get things that I couldnt afford and charge it to my future self. If I had known what I know now, I wouldnt have gotten my first credit card in college. I would have taken the time to learn more about credit and use it in a wiser fashion. I cant take back what I did with credit, but I can use that failure to teach me what not to do.

Luckily I learned from my mistakes and am not scared of credit at all. In fact, I use it regularly, but in a wiser fashion. I know what Im doing now and havent paid a dime in interest since paying off the credit card debt.

Stop Using Your Credit Cards

If you want to get out of credit card debt, its time to break up with your credit cards. And you dont have to have a nice dinner or a big conversation with them. Just put them on the table and say, Its not meits you . . . Youre bad for me, my finances and my future. Goodbye. And never look back.

If you stop using credit cards, youll never run the risk of having a credit card balance. Ever. Again. Start using a debit card and cashyour own real moneywhen you pay for things.

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Pay More Than The Minimum

Look at your credit card statement. If you pay the minimum balance on your credit card, it takes you much longer to pay off your bill. If you pay more than the minimum, youll pay less in interest overall. Your card company is required to chart this out on your statement, so you can see how it applies to your bill.

How To Get Out Of Credit Card Debt: 3 Steps To Follow

Credit Card Debt Help

No doubt, if youre here, youve probably made some mistakes financially. Thats okay, theres no adult walking the earth that hasnt. You can certainly be sure of that.

I truly enjoy helping people get their finances under control. It really does bring me a lot of satisfaction. One thing I do to make sure I stay abreast of new financail crises is to watch message boards. Many times people will join a message board and post something along these lines:

Help me get out of credit card debt!I really need someones help. My spouse and I have made some mistakes financially and now were really in a bind. Were barely making ends meet. Ive even taken on a part-time job. It just seems there isnt enough money at the end of the month. No matter how hard we try, it seems theres always something that comes up that keeps us from saving anything! Please, help us get out of credit card debt. Were drowning!

Small details in these situations change, but the answer is almost always the same. If you find yourself in a similar situation, think long and hard about what you are about to read, then commit yourself to doing it.

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Using The Avalanche Method To Pay Off Credit Card Debt

Where the snowball method attacks the credit card with the smallest balance, the avalanche method reduces your credit card debt by attacking your credit card that has the highest annual percentage rate or interest rate.

While you use minimum payments to pay against all of your other credit cards, you use as much as you can from your available budget to pay off your high-APR credit card.

Once you have fully paid off the high-APR credit card, you use that same monthly budgeted amount in addition to the monthly minimum payment to pay off the next-highest APR card.

The avalanche method works by striking down the biggest contributor to your increasing credit card debt: interest payments. By paying off your highest APR card, you significantly reduce the amount of interest that you must regularly pay each month.

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