Everybody needs credit. It is a credit card that can be used in different places and for different purposes, whether it’s buying groceries or paying the electricity bill. But credit cards have a dark side: they are the leading cause of personal bankruptcy in America today.
Credit card debt is expensive because credit card companies charge interest rates as high as 29%. And with credit cards, there are no payment plans to help pay off your debt gradually- you’re expected to make the entire payment at once! Since most people only budget about $100 per month for all their expenses combined, too many people find themselves in serious financial trouble if they don’t get out of credit card debt right away.
If you’re already deep in credit card debt then this article is for you. We’ll provide tips and strategies to help you get out of credit card debt as quickly as possible.
What is credit card debt & why should I get rid of it?
When someone takes out a credit card loan they agree to pay off the credit card debt over a period of time. Credit card debt is generally repaid through monthly credit card payments for a period as long as three months beyond the date when the credit card itself was opened and used.
If you don’t pay off your credit cards each month, then credit card companies will start charging you interest on top of your current balance. In addition to being charged interest, if you’re sent past due notices by the credit company, there may be late fees added onto your monthly payment. If you stop paying entirely or default on any part of a credit agreement, then it becomes bad credit and can follow you for years into the future.
One way of getting out of credit card debt slow and steady
There’s one sure-fire way of escaping credit card debt: stop using the card, and pay off the debt. Yes, it will take time, and yes, it’ll be a slog. But it works, every time, and it avoids further accrual of interest and reduces the risk of late fees and other additional costs.
When people get into trouble with their credit cards, they often think they need to spend less – but that’s really not what’s needed. What needs to happen is for them to stop spending with the card altogether until the debt is paid down or eliminated completely.
Stop buying things with credit cards and use cash or a debit card instead. You don’t need credit cards to buy groceries or gas anyway. As long as you’re spending with credit cards, your credit card debt will never go away because you’ll never be able to pay it off completely.
Credit card consolidation techniques to get rid of credit card debt quickly
We all know credit card debt is bad, but what are the credit card consolidation techniques you can use to get rid of credit card debt? Read on for some credit card consolidation techniques that will help you.
Firstly, understand your credit score. If your credit score is less than 600, stop using your credit cards and focus on paying off any outstanding balances or loans before applying for new credit. You should also check the terms of your current account and make sure they’re not too high (anything over 22% APR).
If either one of these situations applies to you, it’s time for some more drastic measures. If at all possible, try transferring balance from a high interest rate account to a 0% promotional offer credit card (for example, credit cards with balance transfer promotions typically have a promotional period of 0% interest for 12 months). This is one credit card consolidation technique that could save you hundreds, if not thousands.
If this isn’t possible, try setting up a personal loan or credit agreement to pay off the credit card debt. If you’re careful about credit consolidation loans, they can be a great way to consolidate credit cards and find solutions to help eliminate credit card debt fast!
What’s the best way out of credit card debt for me?
If your credit score is high enough (typically over 680), then apply for a new credit card you can transfer balance from your old account onto. This will give you more control over your finances and help lower interest rates on existing purchases made during good standings as well as protect any points or rewards you may already have. Credit cards should be used responsibly and not to buy frivolous things – they’re an investment, after all.
If your credit score is low, then try going through credit card debt consolidation and apply for credit with one of the credit unions or credit co-ops. With these companies, you may be able to get secured credit cards that require you to put down small deposits to qualify – but will not report any activity to credit bureaus as long as payments are on time. These cards can help build credit while at the same time lower interest rates on existing purchases made during good standings.
Credit counselors may also be another option if you cannot pay a minimum payment due each month, although they charge upfront fees that you can avoid by utilizing other methods mentioned above first.
Is credit card debt always bad?
Paradoxically, no. Credit card debt can be good credit or bad credit, depending on how responsibly it’s used. Using a credit card can positively impact credit score if credit cards are used responsibly and credit is paid off in a timely manner. In theory, credit card debt can be helpful when credit scores are low because credit card companies do not report any activity on the account if credit payments are on time.
However, it can become bad credit debt quickly if credit cards are used irresponsibly. If credit card debt is not paid off within a timely manner, payments will become delinquent and credit utilization on the account will increase. If this happens, credit score can drop dramatically as well as cause additional penalties such as late payment fees, interest charges, and credit limit restrictions that may make it difficult to pay off existing credit card debts in time.
In the end, credit cards are one of the most powerful tools available to individuals in terms of credit management, so use credit wisely and build credit.
What has been your experience with credit card debt? How did you get out of it? Comment below!