There are no single strategies that will work for everyone when it comes to dealing with credit card debt. It’s important to remember that the cheapest way for you to get rid of it may not be the same for your neighbor.
5 Ways to Get Control of Your Credit Card Debt
1. Use All of Your Resources to Attack Debt Head-On
According to the experts at SoFi, “It may be tempting to just make the minimum payment on your credit card and put off paying the total bill amount until another time. But, only making your credit card minimum payment can cost you both interest and can lower your credit score. Plus, it will keep you in debt longer.” When you choose to only make your credit card minimum payment each money, your debt will continue to grow due to interest fees.
Get aggressive and pool together all of your financial resources to pay as much toward your balances as possible. This will save you money on interest and help you get out of debt quicker.
Before you start, have a budget in place. This will allow you to determine if you have the necessary savings and income to pay off your debts. You can also start a side hustle or earn a raise, and transferring money from one credit card to another could help.
2. Apply For a Balance Transfer Card
If you have good credit and are looking to transfer the balance from one card to another with a lower interest rate, consider a balance transfer credit card. Some cards offer zero percent annual percentage rates on balance transfers. Before you start using a new credit card, make sure that the math makes sense to you. Use a balance transfer calculator to see how it will affect your budget.
3. Apply For a Loan to Consolidate
Credit card debt can be especially hard to pay off due to the high-interest rates that it charges. According to Bankrate, the average rate on a credit card is around 16.4%.
One way to get out of debt is by replacing your credit card with a debt consolidation loan, which is a type of loan that combines both your existing debts and a new one. This type of loan has lower interest rates and typically comes with a lower monthly fee.
4. Sign Up For a Debt Management Plan
If you tried to lower your credit card interest rate or settle your debt, chances are that you failed. If you still have not been able to do so, then you might want to enroll in a debt management plan, which is a type of program that includes the services of a credit counselor.
A credit counselor can help you develop a debt management plan that will help you pay off your debts quickly. They can also help you establish a budget and communicate with your creditors.
5. File for Bankruptcy
If you are unable to settle your debts and are considering filing for bankruptcy, this is the most expensive option. It can take a long time to get out of debt and it can affect your monthly budget.
Although it’s possible to see a clean slate after filing for bankruptcy, it can also affect your future. According to the FTC, bankruptcy can be reported on your credit reports for up to 10 years. Even if you can successfully discharge your debts during bankruptcy, you might still have to pay for court fees and other expenses.
Keep in mind that the best choice for you will depend on your financial situation. No two people will need the same solution.