Develop one or more payment tactics
If you think how to get out of credit card debt, consider these ways to help you reach your goal faster. Having a specific repayment goal and strategy will help keep you and your credit card debt under control.
Try to pay more than the minimum
Credit card issuers offer a convenient monthly minimum payment, typically 2% to 3% of the balance, to ensure you make payments on time. However, banks make money from the interest they charge for each payment period, so the longer you pay, the more they get.
The snowball method for paying off debt uses your sense of accomplishment as the primary motivation. How to get rid of credit card debt? You prioritize your loans by amount, concentrating on the lower ones first. When you fully repay this loan, you can move on to the next smallest loan until the full repayment of obligations. Like a snowball rolling down a mountain, you will gradually make larger and larger payments, eventually getting rid of your debt.
Like a snowball, the avalanche approach affects your priorities. Instead of initially paying off the card with the lowest balance, you're paying off credit card debt with the highest interest. It's generally a faster and cheaper method than snowballing.
Payment automation is an easy way to ensure your debts are paid off, and you avoid additional costs connected with late payments. However, if you're practicing the debt snowball or debt avalanche method, you'll have to be more careful to ensure you're depositing what you want into each account.
Consider debt consolidation
If you have a good credit history, but your debt payments have become overwhelming, consider combining them into one bill. Thus, you will need to make one monthly payment to replenish the balance.
0% credit card balance transfer
It may seem odd to apply for a new credit card when your main goal is to pay off your debt credit card, but 0% balance transfer cards can help you save money in the long run. Find a card that offers a long initial 0% period - preferably 15 to 18 months - and transfer all outstanding credit card debt to that account. You will have one easy monthly payment, and you won't have to pay any interest.
Similarly, you can take out a debt consolidation loan with a fixed interest rate to pay off your debt. Although you will have to pay interest, personal loans tend to have lower interest rates than credit cards, saving you a good amount of money. Use the Debt Consolidation Calculator to estimate savings.
Interact with lenders
Communicate with creditors, and explain your situation to them. The credit card issuer may want to negotiate payment terms or offer a hardship relief program, especially if you are a long-term client with a good credit score.
If your issuer offers a hardship relief program, it can provide relief when circumstances beyond your control, such as unemployment or illness, affect your ability to manage payments. Whether you are negotiating with your issuer or accepting the terms of a hardship relief program, either option may result in more affordable interest rates or fee waivers, depending on the issuer.
Even seemingly minor changes can be enough to understand how to lower credit card debt; the worst case is that you will be rejected.
Negotiate debt relief
When your total debt is more than you can pay each month and you are struggling to control your debt, it might be time to take more severe steps. Consider debt relief variants such as bankruptcy or a debt management plan.
Debt management plan
Debt management plans are created with the participation of a non-profit credit advisory organization; the consultants negotiate more loyal terms with your creditors and consolidate your credit card debt. You will then pay the consulting company a fixed-rate monthly. Your credit accounts may be closed, and you may have to give up new loans for a while.
Filing for Chapter 7 bankruptcy explains how to not pay credit card debt, but you need to be prepared for the consequences. Chapter 13 bankruptcy help to restructure your debts into a payment plan within 3-5 years and may be better if you have assets you want to keep. It can stay on your credit report for ten years, although your credit score will likely recover a few months after applying. Some debts, for example, student loans and tax debts, generally cannot be written off in the event of bankruptcy.
In debt settlement, the creditor agrees to accept reducing credit card debt. While this may sound like a good deal, it's not an option for most people. Typically, you hire a debt settlement firm to negotiate with your creditors on your behalf. Find out more about how debt settlement works and the risks involved.