Team Up With An Accountability Partner
Partner up with someone who is also paying off debt. Commit to weekly or monthly check-ins to see how your progress is going. If things are getting in the way, your buddy can offer you encouragement and support. When you hit a checkpoint, consider celebrating together.
Say you and a friend are pushing each other along with writing your first self-published books. You both email each other word count updates and have looked over drafts, giving each other valuable feedback. Knowing that someone is anticipating your updates also gives you incentives to proudly keep plugging along toward a finished product.
Consolidate Debt With A Personal Loan
Personal loans can be a good alternative to balance transfers if you have a large amount of debt. If your debt is spread out across several credit cards, you can consolidate it into a personal loan. And depending on your credit score, you may qualify for a loan amount that will cover your entire balance.
A personal loan provides you with a fixed amount of money over a fixed time period and usually at a fixed interest rate. The interest rates for personal loans are rarely 0%, but often lower than keeping a balance on your current credit card.
Credit Card Hardship Program With Bank
In some cases, you may only be able to get a temporary reduction in the monthly payment, but if youre going through financial hardship , that may be your best solution.
To be considered for a banks credit card hardship program, you must be behind on your monthly payment, but not to the point where your credit report is negatively affected. Some banks may have also extended COVID-19 debt-relief options but only consider one of these plans if the creditor is willing to pause the interest and payment. Otherwise, the interest continues accruing and just gets tacked on to your existing balance, making your debt grow even larger. Credit card forbearance and deferment options are only worth considering if the interest is either reduced or paused.
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Ways To Get Out Of Credit Card Debt
6-Minute ReadJune 06, 2022
You have credit card debt, and apparently so does everyone else. According to the Federal Reserve, outstanding credit card debt remains prominent in America. While Americans began 2020 with more than $1 trillion in credit card debt, a study by Wallethub confirms that U.S. consumers ended the year with a decrease of about $89 billion for the first time since 2009. Per Wallethub, the average credit card debt per household still looms at $7,849.
While there might have been circumstances out of your control that got you into debt an accident, job loss or medical bills the good news is that you can take action today to eliminate your debt entirely.
Here are a handful of ways to crush your credit card debt for good.
Get A Credit Card Consolidation Loan
Transferring your balance to a new card is relatively simple, but its not always the greatest option if you have large amounts of debt. Thats why I also suggest investigating a consolidation loan as another way to lower your interest rate.
When you get a consolidation loan, another lender takes over your credit card debt. You then repay your debt to the new lender at a lower interest rate, thus saving you money.
While simple in theory, expect to spend some time on this process. Since youre applying for a new line of credit, youll have to fill out some paperwork and answer questions about your financial history. And, of course, a higher credit score will make it more likely that youll get approved and get a competitive interest rate.
To find a credit card consolidation loan, you have a few options:
Talk to your existing bank
If you already have a relationship with a bank, they may be more likely to lend to you. Bonus points if you bank with a credit union, which can often be easier to deal with than a large, corporate bank.
Compare options with Earnest
Manually shopping for loans is challenging and time-consuming. Earnest helps simplify the process, comparing lenders and recommending the best for your needs.
SoFi is doing a lot of great work to help people reduce and pay down debt more quickly. Youll still need to do your research to decide if SoFi is right for your situation, but theyre a great place to start.
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Raise Your Credit Limit
If youre the kind of person who takes it as a point of pride never to fall behind on credit card bills, you may be more susceptible to bad behavior when things do get a little out of control, according to a study in the Journal of Marketing Research.
Lets say theres one especially expensive month when the refrigerator goes bust, you have to fly to your cousins destination wedding in Alaska and the dog gets sick. You look at your statement, then at your bank account and realize you just cant swing it. Pretty soon you start buying stuff left-and-right, no matter the consequences. After all, youre not a responsible borrower anymore, so you might as well have a little fun.
Youre not alone. That same study found that carrying a credit card balance tends to increase spending for people with relatively high self-control. Once a self-controlled spender fails to live up to their goals they feel, well, like a failure.
And with that failure comes permission to spend more and buy higher-priced items than you normally would. Its known, according to Keith Wilcox, a professor of marketing at Columbia Universitys business school and one of the papers authors, as the what the hell effect.
The more you beat yourself up, the more likely overspending is to occur, Professor Wilcox said.
Finally, truly consider if that increase will send you further over the edge. If you think it will, this method is not for you.
Joint And Cosigned Debt
Joint debts and cosigned debts are debts signed by two or more individuals. It is known as joint debt because two or more people came to an agreement to take the loan. Since the debt is co-signed by more than one person. Both co-signers are legally responsible for their repayment. You cannot contract out of a shared obligation without the creditors consent.
What this means is that even after the death of one party, the debt still has to be paid by the other parties still alive.
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Use Savingsthis Will Help You Pay Down Debt Faster
Many people regularly contribute to a savings plan, which is great, but this money could help you pay down what you owe faster.
Once you have an emergency fund and are saving for irregular expenses, consider stopping extra payments to savings accounts until youve paid off what you owe. This is especially helpful for those who arent saving for something specific like vehicle repairs.
The money you save by paying down your debts faster will be much higher than any interest youll earn in a savings account. Also consider using income tax refunds, job raises, or other cash boosts to accelerate this process.
Work With Your Creditors
Reach out to your creditors to explain your situation. A credit card issuer may be willing to negotiate payment terms or offer a hardship program, especially if youre a longtime customer with a good track record of payments.
If your issuer offers a hardship program, it may provide relief when circumstances beyond your control like unemployment or illness impact your ability to manage payments. Whether you negotiate with your issuer or accept the terms of a hardship program, either option could lead to more affordable interest rates or waived fees, depending on the issuer.
These small changes might be just enough to help you get a handle on your debt, and the worst that can happen is they say no.
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Vowing To Never Use Credit Again
Misusing a credit card leads to plenty of financial pain. Using a credit card properly, though, is a smart financial move.
Too often, consumers whove spent a year or more to pay off credit card debt vow to never use credit cards again.
This is a mistake, Amrany said. Using a credit card to make purchases and then paying the balance off in full and on time each month is one of the best ways to rebuild a weak credit score.
And this is important for consumers whove just paid off a large amount of credit card debt. Since having too much card debt can cause a credit score to fall, rebuilding credit should be a priority.
But those consumers who never again use their credit cards miss out on the best way to boost their scores, Amrany said.
The pendulum swings too far in the other direction for them, Amrany said. The fastest way to improve your score is to use your credit card responsibly.
Tip: Amrany recommends that consumers use plastic even if they have the cash to pay for all of their purchases each month. Using a credit card and paying it off on time and in full each month will help you boost your credit score.
Transfer Your Balance To A 0% Credit Card
If you have good credit generally a credit score of 690 or higher you may be able to transfer your balance to a credit card with a 0% introductory rate that lasts 12 to 18 months. With no interest to worry about, you can focus on whittling down the core debt as fast as possible.
In general, you cant transfer debt among cards from the same issuer for example, you cant transfer a Chase balance to another Chase card. Most cards charge a fee of 3% to 5% of the amount transferred, although a few cards don’t charge a fee for balances moved within a certain time frame.
If you choose this route, make a plan to pay off your full balance before the introductory period ends to avoid accruing interest charges.
About the author:Erin is a credit cards expert and studies writer at NerdWallet. Her work has been featured by USA Today, U.S. News and MarketWatch.Read more
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Consider A Balance Transfer Card
It may seem counterintuitive to apply for yet another card to tackle your debt, but credit cards with good balance transfer offers allow you to move your existing balance over to a card with low or even 0% interest for a certain period of time. By doing that, you eliminate some or all of the interest you’d be incurring with the other card, allowing you to pay the debt off more quickly. Unfortunately, if you’re in serious debt trouble, the new issuer may turn down your application.
Choose A Strategy And Stick To The Plan
Paying off debt can be done quickly with proper planning. Do your research to determine which strategy will work best for your personal circumstances and stick to the plan. Becoming debt-free will open many more financial doors in the future and allow you to reach various life goals faster, not to mention the good credit score youll likely achieve.
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Ask Your Credit Card Issuer For Help
Depending on your situation, you may be able to negotiate with your credit card issuer. You won’t be able to talk down your balance, but you could possibly work out a more favorable interest rate or have your late fees waived. This isn’t necessarily a slam dunk, but a study found that 87% of cardholders polled were able to get their late fees forgiven, while 69% said they were able to get their interest rates reduced. It never hurts to ask.
The Debt Snowball Method
With the debt snowball method, youll focus on paying off your smallest credit card balance first, then youll work your way up to your larger balances.
Follow the steps:
Step 1: Continue to make the minimum payments on all your credit cards.
Step 2: Use your extra money towards the credit card with the smallest balance.
Step 3: When the credit card with the smallest debt is paid off, move on to the card with the next smallest debt.
Step 4: Continue this process until all your debts are paid off.
The snowball method can be a good option for those who have several small credit card debts to pay off. This method lets you see progress faster, but you may end up paying more overall since youre not considering your cards interest rates.
If you have money saved away for a rainy day, you may want to consider using some of your savings to help pay down your credit card debt. If your interest debt is higher than the amount of interest youre earning in savings, youre better off using some of your savings to lower your debt because carrying a high interest on a high balance will cost you more.
Carrying credit card debt can negatively impact your financial future. Paying it down means youll save on interest, improve your credit score and have more money available to put away for emergencies or an important savings goal.
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Create A Monthly Spending Planit Will Help You Avoid More Debt
To learn how to get out of debt and to stop borrowing from your credit cards again and again, create a monthly spending plan for your money. This will let you live within your means rather than above your income, which is where credit card debt comes from. It will also make it clear when you can expect to be debt-free so long as you stick to the plan.
Want help making a plan? Weve got an interactive budget calculator spreadsheet that will guide you through the process and make the idea of budgeting way less painful. This will help you stay within your budget and maximize your ability to pay down your debts. We also have lots of other budgeting resources if you prefer different ways of budgeting.
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Automate The Repayment Process
Creating a repayment plan is one thing sticking to it is quite another. The easiest way to force yourself to stick to your credit card repayment plan is to automate your payments. This way, they come out of your bank account before you have a chance to think about them.
Luckily, all major credit card issuers make it easy to set up automatic payments online. Take the amounts that Mint gave you in the previous section and set them up as recurring payments.
Then, create a recurring task or reminder to revisit your repayment plan each month. This will give you a chance to assess if youre still on track and if you can afford to put extra money towards your payments.
Note: Automating your payments will only work if you pick a monthly amount you can actually afford. If youre constantly having to lower your payment amount just to make ends meet, then you should reduce it to something more realistic.
Pay Off Purchases Immediately
Cutting up your credit cards is one way to prevent revolving debt, but you can benefit from the rewards and payment convenience without taking on debt as long as you pay off your purchases immediately.
Treat your credit card like a debit card and only charge what you know you can afford based on whats in your bank account. This keeps your balance in check and allows you to take advantage of the perks your card offers.
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What You Need To Know About Debt Collectors
Collectors may collect the name, address, and phone number of the deceased persons spouse, executor, administrator, a family member, or another person with the ability to pay the deceased persons debts by contacting other relatives or other persons linked to the dead who can provide the information.
Typically, collectors may only contact these relatives or other persons once to get this information, and they are prohibited from discussing the specifics of the debt.
If the family or other individual provides the collector incorrect or partial information, collectors might re-contact them. However, debt collectors are still prohibited from discussing the debt in such 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.
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