Many Americans are struggling to pay off their credit card debt. Unfortunately, making late payments or not paying at all results in interest, meaning you have to pay the credit card company more money. Even if you have a small debt, it can quickly spiral into a big one when you fail to make payments. If you are struggling to get out of credit card debt, here are some tips to help.
Create a Payment Strategy
You need to develop a payment strategy when trying to get out of debt. Do you have more than one credit card debt? What is your strategy to repay them? It can be frustrating when creditors are calling you because of missed payments. In extreme situations, they can use you. Even though you can’t be arrested because of debt, you can go to jail for disobeying a court order.
For example, if the court orders you to make payments but you don’t, you can be arrested. In certain circumstances, contempt of court is considered a felony. A Texas State Jail felony can result in a minimum of six months and a maximum of two years in state jail, plus a fine of up to $5,000. The last thing you want is to get the law involved with your finances. Create a smart payment plan to avoid legal issues.
Pay One Debt at a Time
If you have debt on more than one card, try handling one card at a time. How about starting with the card with the highest interest rate? You will still be paying a minimum monthly payment on all your credit cards, but you will direct extra cash into the debt with the highest interest rate. Once you finish off that debt, you go to the next debt with the highest interest rate. Keep doing so until you eliminate all your debt.
Review How You Spend Cash
Analyze your spending. How much do you spend on housing, fuel, groceries, vacation, outings etc? Start looking for areas you can reduce your spending. For instance, if you order takeout often, start preparing food. You may be surprised how much money you’ll save in a month.
If you go for Botox treatments every three months, increase the duration to five or six months. This cosmetic procedure isn’t exactly cheap, yet it’s the most common in the U.S. According to Gitnux, in 2020, the United States witnessed more than 4.4 million Botox procedures. By reducing the frequency of these treatments, you can save more money and direct it to your credit card debt.
Most people have a savings account for rainy days. While this is great, you could use that money to get out of credit card debt quickly or eliminate your debt entirely. The first way to do this is to stop directing money to your savings accounts. Instead, use that cash to start paying what you owe the credit card company. The other alternative is to withdraw your saved money and use it to clear or reduce your debt.
Consolidate Your Debt
Consolidating your debt involves combining all your credit card debts and paying them off with a new credit card. Maybe you have been paying your debts diligently and have a good credit score. However, an emergency throws you off balance, and now you have credit card debt. For example, you or your child may have needed orthodontic treatment. This isn’t uncommon, considering statistics have found that 50% to 75% of people need orthodontic treatment.
Since you already have good credit, when you consolidate your debt, your new debt will likely have a lower interest rate than your credit cards. Find cards with a 0% introductory period where you don’t pay interest in the first few months or even a year. This will help you pay your debt without paying interest on this new loan.
Being in debt doesn’t just affect your credit but also your mental health. The constant worry about managing your debt can be a source of distress. By using these tips, you can start your journey to a credit card debt-free life.