10 Ways to Get out of Credit Card Debt
When it’s so easy to whip out a credit card every time you want to buy something, it’s no wonder so many Americans are in debt. In fact, according to Creditcards.com, the average credit card debt per household with credit card debt is approximately $15,000. Add in high interest rates on owed balances of around 14%, and consumers often find themselves struggling just to make minimum monthly payments, let alone pay down any principal.
Regain Financial Control
But just because so many Americans have credit card debt, it doesn’t mean you have to be among them. In fact, now is the perfect time for you to enlist some creative solutions to help you get out of credit card debt fast. Here are some options to consider:
Spend less than what you earn and pay more than the minimum amount due on your credit cards. It seems so simple, yet many consumers fail to follow this basic advice. If you can’t afford to pay for it now, don’t buy it. Live within your means and divert those saved dollars to your card balances with the highest interest rates. Sending in anything beyond the minimum payment, while still fulfilling your other financial obligations, is one of the best ways to get out of credit card debt fast. (Learn how your credit card's interest rate and minimum monthly payments affect your bottom line using CareOne Debt Relief Services online credit card debt calculator.)
Avoid unnecessary expenses. Replace concert or movie tickets and dinner at a hip new restaurant with more frugal choices. For example, borrow a free DVD from your library, attend a high school sports game, and cook at home. If you can avoid any major cancellation fees, consider canceling your gym membership until you pay off your debt and try exercising outdoors or at home. Again, redirect those savings toward your credit card balances.
Boost your income. Obtaining a second job would place you among a growing number of Americans who moonlight to make ends meet, want to build their savings, or need to get out of credit card debt. Can you juggle two jobs or add part-time work to your career? Have you considered selling items you no longer need on Craigslist or eBay? Alternatively, think about hosting a yard sale, offer up your time by pet- or house-sitting, or turn your hobbies and interests into income as a music instructor, writing tutor, handyman, etc.
Use a debit card. According to a Federal Reserve Bank of Boston 2010 survey on consumer payment preferences, 80% of consumers own a debit card. If you fall within this category, using a debit rather than a credit card forces you to buy only what you can afford based on the balance in your bank account. If the money is not there, you can’t spend it. This also prevents the risk of damaging your credit if you can’t pay the bill.
Remember cash? Those small-dollar purchases you make using a credit card may not seem like much individually, but they add up when examined collectively. The next time you want to add a fancy latte or new video game to your shopping list, put the credit card away and buy only what you can afford using the cash in your wallet. Follow this advice, and those last-minute additions might not seem so necessary.
Review your budget … OFTEN. Schedule a weekly appointment on your calendar to review what you’ve spent during the previous week, ensure that any outstanding bills are paid on time, and identify upcoming expenses so you can plan to cover them. Schedule this time just as you would a doctor’s appointment or business meeting, and you’re more likely to perform these important budget reviews and manage your finances more effectively.
Call your creditors. If you’ve been making consistent payments, call your card provider, and request an interest rate reduction or new monthly repayment schedule so that due dates fall after you receive your paycheck. Consumers who shift their payment due dates can often allocate their income more effectively and ensure timely payments. You have nothing to lose by requesting these concessions.
Consider debt consolidation. Despite your best efforts, if you’re not getting out of credit card debt fast enough, contact a reputable credit counselor who can tailor solutions based on your needs. One possible solution, a debt management plan, consolidates your unsecured debt into a single monthly payment that you send to a debt relief company such a provider of CareOne Debt Relief Services, which distributes designated funds to your creditors. After you make a string of timely payments, the debt relief provider leverages that history to secure benefits to help you fulfill your obligations over time (e.g., interest rate reductions, late and over-the-limit fee waivers, and reduced monthly payments). Another plan, debt settlement, helps people who can’t repay their debt in full and are facing bankruptcy. Under this arrangement, your debt relief provider approaches your creditors with an offer to settle your accounts for a portion of the amount owed. Your counselor can recommend the best strategy based on your income, financial goals, and extent of debt.
Plan for unexpected expenses. It may sound counterintuitive to suggest saving in an article about how to get out of credit card debt fast, but as you chip away at your debt, it’s equally important to build a nest egg so you can handle unexpected events. For example, you could lose your job, suffer a medical emergency that prohibits you from working, get divorced, or face caring for an elderly parent. Even if your income is unsteady, you can still save when you make it a routine part of your budgeting process.
Set a realistic goal and reward. Calculate a date when you’d like to pay off a credit card or bill and then enjoy a responsible dinner out or new item of clothing. The reward doesn’t have to be fancy or expensive, but there’s a psychological boost to be gained when achieving each milestone on the way to becoming debt-free.
Getting out of credit card debt is only half the battle. Yes, you need to follow these tips, but you also need to address – through education and financial counseling – how you wound up so far in the red in the first place so you can stay out of debt for good. Stick to your plan, or the plan provided by a reputable credit counselor, and you will achieve your goals and get out of credit card debt.
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