Balance Transfer Credit Card
If you pay off the balance during that period, a balance transfer card can be an amazing deal. You wont just lower the interest youll eliminate interest charges for the length of the introductory period.
However, if you dont finish paying off the debt by the end of that period, the cards regular APR will kick in, and it may be higher than your current interest rate.
To make sure you dont get caught with high interest rates, you might only transfer the amount you know youll be able to pay off in time. You could then set up a payment plan for yourself with higher monthly payments. For example, if you owe $1,200 and your 0% introductory period is 12 months, you would pay $100 per month so that its paid off in time.
See related: What is a balance transfer and how does it work?
Note that balance transfer cards are typically available to consumers with good and excellent credit. If you know your credit needs some work, you might want to choose a different method of reducing debt.
Tip: If you dont think youll qualify for a balance transfer card, take a look at the cards you already have. You might be able to get a good offer and transfer your high-interest balance onto your existing card if you havent exhausted its credit limit. Make sure to read the cards terms carefully before taking this step to be aware of the rates and other conditions.
Save A $1000 Emergency Fund
If getting rid of those credit cards freaks you out because you use them as an emergency fund, then get yourself an actual emergency fund as fast as possible.
Save $1,000 quickly. Leave it in savings as a buffer between you and those life happens moments. And trust us, its way better than a credit card. If you have an emergency and pay cash, you wont be charged interest. Boom.
Talk To A Bankruptcy Lawyer
Need professional help? Start here.
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Option : Personal Debt Consolidation Loan
Here you take out a personal loan for debt consolidation. You qualify based on your credit score and choose a term that offers monthly payments that work for your budget.
Most unsecured loans offer terms of 12-60 months. A shorter-term will increase the monthly payments but decrease the total interest charges applied to your debt. A longer-term will lower the monthly payment but increase your total costs. You want to choose the shortest term you can comfortably afford to pay to get out of debt as quickly as possible.
For this solution to be as beneficial as possible, you generally want an interest rate thats no higher than 10 percent.
The money from the loan goes to pay off your balances, leaving only the loan to repay at a lower interest rate.
First Call Your Creditors To Negotiate Lower Interest Rates
This is the all-important first step that most people skip. People often never call their creditors to even ask for lower rates. As a result, it makes it harder to eliminate the debt and leads to higher costs.
Always keep in mind that lower interest rates make it easier to pay off debt. A lower rate means less of each monthly payment you make gets eaten up by accrued interest charges. Thus, you can pay off the principal much faster.
To do this step effectively:
Now call the customer service department for each credit card and request a rate reduction. You may be passed up the chain to a supervisor that can authorize a new rate. Find tips to help you negotiate lower interest rates effectively.
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Option : Debt Management Program
If you have too much debt to pay off on your own or a low credit score, you may need help reaching debt-free status. In this case, you can contact a agency that comes in and works on your behalf. They help you work out a repayment plan that works for your budget. Then they contact your creditors to arrange for lower interest rates.
You can qualify for a debt management program regardless of your credit score. You make one payment to the agency and they distribute the payment to your creditors as agreed. Its like an assisted form of debt consolidation without a loan.
Here are a few examples of the results you can see with a debt management program:
Simple Things You Can Do To Cut Credit Card Debt
June 9, 2013 by National Debt Relief
Credit card debt got you feeling as if you were being circled by a pack of starving hyenas? If so, relax and take a deep breath. You can cut that get it under control and sleep better at night.
1. Prioritize those bills
The first thing you need to do is prioritize your bills. Put them in order of those that are most important such as your mortgage payment or rent or an auto loan. These are the expenses that are toughest to cut. On the other hand, entertainment, cable and cell phone packages are ones where you could make cuts.
Its easy to prioritize credit card debts. You simply arrange them by their interest rates from highest to lowest. You may find there are huge differences between the interest rates youre paying on your credit cards. You might learn that youre paying twice as much interest on one card as another. For example, as of this writing the Capital One Standard Platinum Card had an interest rate of 19.30% vs. the 7.40% you would pay on the Capital One Premium Prestige card.
2. Learn to negotiate
If credit card companies are constantly harassing you, you may feel that you have no recourse. But you might be able to negotiate a reduction in your interest rates. Just call the company that issued the card and ask them to lower your rate. The worst they can do is say no.
3. Snowball your credit card debts
4. Stay on course
A better solution
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Myth No : I Have To Pay Someone To Help Me Settle My Credit Card Debt
The truth:;I proved that myth is not true, says Kenny Golde, author of The Do-It-Yourself Bailout.
Golde is a filmmaker whose partner became ill and died while they were making a movie. By the time the film was completed and it became apparent the film wasnt selling in a timely manner, Golde was $250,000 in debt. He consulted with a bankruptcy attorney, who told him about debt settlement.
Golde had heard a lot of debt settlement companies are scams. He figured no one would work as hard on his behalf as he could. Besides, he says, Here was a challenge, and I wanted to move forward and meet that challenge.
Golde successfully negotiated his debts and saved nearly $150,000.
On the other hand, having an experienced negotiator on your side can help.
You call and try to negotiate a balance, and its like, Get in line. A card companys attitude may be, Yeah, you and everybody else, says Ken Clark, author of The Complete Idiots Guide to Getting Out of Debt.
Based on experience negotiating with creditors, debt settlement companies know what percentage of debt owed each creditor is likely to agree to, Gordon says. The pros also have more leverage with creditors due to their volume of business.
Its kind of like, you can change your own oil in your car, but that doesnt mean youre going to do it the right way, Gordon says.
How To Negotiate When Times Are Good
If you’re not having trouble paying your debts and you have a good , you might want to contact your credit card companies to ask for a lower interest rate. While the answer could initially be no, if you tell them that you’re considering switching to a card with a lower rate, they might be willing to work with you.
Also Check: What Is Credit Card Reconciliation
Navigating Credit Card Debt During Covid
If youre experiencing a higher amount of credit card debt because of the coronavirus pandemic, youre not alone. Many people may find themselves with more debt right now or may be facing debt issues theyve never encountered before.
If that describes your situation, you may have options.
Weve compiled some resources to help you find relief measures announced by credit card issuers and more. If you can take advantage of these relief measures, they may help ease some of your financial burden, making your credit card debt more manageable. Check out our roundup of those resources below.
Eliminate Your Credit Cards From The Most Expensive
One way to cut credit card debt is by getting rid of credit cards that you either dont need or that are harming you financially.
Having multiple cards is the surest way to accrue debt. If youre already in this position, it is prudent to reduce your number of cards to one or none. You could even choose a debit card instead of a credit card as it helps you better manage your finances.
If you have multiple credit cards, do not make equal payments on each of the cards. Instead, make substantial payments to the cards which have the highest interest first and reduce the amount with lower interest credit cards. This debt repayment technique, known as a debt avalanche, is the most efficient for managing your debt.
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Other Debt Relief Options
Working with a debt settlement company is just one option for dealing with your debt. You also could: negotiate directly with your credit card company, work with a credit counselor, or consider bankruptcy.
Talk with your credit card company, even if you have been turned down before. Rather than pay a company to talk to your creditor on your behalf, remember that you can do it yourself for free. You can find the telephone number on your card or your statement. Be persistent and polite. Keep good records of your debts, so that when you do reach the credit card company, you can explain your situation. Your goal is to work out a modified payment plan that reduces your payments to a level you can manage.
If you don’t pay on your debt for 180 days, your creditor will write your debt off as a loss; your credit score will take a big hit, and you still will owe the debt. Creditors often are willing to negotiate with you even after they write your debt off as a loss.
Contact a credit counselor. Reputable can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
Secure An Additional Source Of Income
If you’re already on a barebones spending plan, or you’d rather earn more than spend less, look for ways to make more money you can use to pay down debt. For instance, you might sell items you don’t want or need anymore, which could secure you a quick infusion of cash. Renting out an extra room, your car or your parking space when you’re not using them via platforms like Airbnb, Turo and JustPark, can also be lucrative.
Or make extra money from home by tutoring online, freelancing on the side or user-testing digital products on sites like UserTesting.com. You can also take on a part-time job, or work at your own pace with a side gig like shopping for groceries on Instacart or delivering food on DoorDash or Postmates. Do the math on how much extra you need to earn in order to start paying down your debt; taking on too much work on top of your current commitments could lead to burnout. Another option is to ask for a raise at work, once you’ve researched the market in your industry and you’re willing to demonstrate how you’ve brought value to the company.
Read Also: Is Apple Credit Card Worth It
Refinance With A Personal Loan
Ask your credit union or bank if you can roll all your card debt into one lower-interest loan. The average rate on a two-year personal loan from a bank was under 10 percent at the end of 2020, according to the Federal Reserve. That may be a better deal than you can get from your card issuer. Don’t borrow against your home or your car to pay off your card; that creates a new risk of losing your possessions. And don’t grab at debt consolidation loans from companies you’ve never heard of. Chances are too high that they’ll load you up with new fees or, worse, scam you.
Use Some Of Your Savings To Pay Your Credit Card Debt
If you owe more in interest on your credit card than what you are earning in interest in your savings account, you may want to put some of your savings to better use by paying down your credit card and reducing high-interest debt. While it’s important to build up your savings account for many reasons there are times when that money may be more useful by paying off debt.
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Cut Costs Of Overdrafts
If you’re constantly in your overdraft then the fees could add up and if you find yourself going over your agreed amount then it could be more expensive than a payday loan.;
Once you’ve cleared your balance make sure you’ve got an account with a good deal.
Online-only bank First Direct;currently offers up to £125 in cash for customers who switch to it;but don’t forget to compare accounts before switching to make sure its right for you.
Contact Creditors And Create A Payment Plan
Working with your creditors is a great way to take the first step to tackle credit card debt. Because credit card debt is a type of unsecured debt, creditors are usually more than happy to work with you to help ensure they receive the due money.
Forbearance is the financial hardship assistance provided by a lender. When a borrower cannot make their regular payments, the bank may offer temporary assistance to let them regroup financially. Asking an issuer for forbearance may sound stressful, but it does not have to be.
The good news about credit card forbearance is that it will not directly impact your credit score. While in forbearance, your credit score will not experience any adverse effects, provided you keep up with the minimum obligations your card issuer requires. Keep in mind, however, that forbearance does not mean interest stops only that your monthly minimums will decrease for the length of the terms.
Related Article: Does Credit Card Forbearance Hurt Your Credit Score?
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It Takes Time And Determination To Conquer A Mountain Of Debt
But if youre equipped with the right knowledge and tools, the journey to conquering that mountain can be relatively smooth. Plus, you dont have to tackle that mountain of debt alone credit counselors are available to help.
Of course, no two attempts to conquer debt are the same a debt reduction plan that works for one person may not work for another. And unless you stick to your plan, youll likely have a tough time chipping away at your debt.
If youre not sure how to tackle your credit card debt, weve got some advice on steps you can take. While this advice wont guarantee success, it can help point you in the right direction.
When Youve Cut Your Credit Card Debt In Half
When you reach your goal and have cut 50% of your credit card debt, dont stop there theres more to do in cementing your new savings status.
Once the credit card debt is paid down, make sure you always pay the balance in full each month, Davis said. If youre using a credit card, utilize only 20% of the maximum available credit to keep debt low and helpboost your credit score.
Additionally, dont take your new-found credit card debt management situation for granted.
One of the biggest mistakes people make in paying off debt is assuming it can be paid off later, said ;Alex Miller, Founder & CEO of;UpgradedPoints.com; a travel site that provides analysis, data, reviews and in-depth guides to travelers. While youre saving money to pay it off, folks sometimes get in the habit of slipping back to where they were before and not actually paying it off. Set a schedule every month for how much youre going to pay and stick to that plan.;
If youre not meeting your timeline goals and youre feeling financial pressure when hacking away at card debt, cut yourself some slack.;
The most realistic time frame for you is going to depend on just how muchyou can earn and how much you can cut your spending, Barker said. Once youve workedthat out, youll be best placed to determine just how quickly you can payoff any credit card debt you carry.
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