Solutions for Repairing Credit Card Debt

Millions of Americans are currently experiencing the strains of being under credit card debt.  Many have been in debt for years paying much more in finance charges than their purchase’s original price tag as they continually accumulate from the interest.  The time to take action is now and we’ve listed here the solutions you can utilize for reclaiming a debt free life. 

Pay More than Your Minimum

This point is just simple math.  If you’re only paying the minimum it can take you years to become debt free depending on the amount you owe.  For every month that you carry a balance you’ll be charged interest on the amount which can be in the hundreds.  By paying more than the minimum you’ll be able to increase the speed in which the balance is paid off and better control the interest fees.

Make a Budget

In order to make the first point possible you must create a budget and stick to it.  Start with your long-term monthly bills that you’re required to pay monthly at a fixed amount, such as your car payment.  Include in this section the approximate cost of groceries and gas which are also necessities for each month.  

The next step is to add your monthly various expenses that aren’t fixed, for example entertainment expenses.  For the most accurate budget be honest with yourself and list every expense here, even the minute ones.

Once you have your baseline of what you must pay for then factor in all of your various sources of income.  Using these two calculations you’ll be able to determine how much is left over for saving and additional monthly expenses. 

At least a portion of this amount should go towards paying more than your credit card minimum.  If you have very little left over or even a deficit you must carefully analyze and eliminate some of your expenses.  The only way to get out of debt is going to be spending less and saving more. 

Transfer Your Balance to a Lower Interest Rate Credit Card

If you have a balance on your credit card that is becoming hard for you to maintain at least a minimum payment on it may be time to look into transferring your balance.  Many credit cards have introductory offers in which you can take advantage of 0% interest on balance transfers for a short period of time, typically from 6-12 months. 

As long as you don’t use the card and accumulate more debt this could be a solution for paying down your current balance to a manageable level.  Just be aware that some of these balance transfer credit cards can have extremely high interest rates after the intro period is up and you can very easily lose the intro rate if you are late making a payment. 

You’ll want to use this option sparsely since numerous transfers can hurt your credit score.

Work With Your Creditors

This might seem like an unlikely place to find debt relief help but the truth is if you can’t pay your creditor they suffer just as much as you.  It costs them time and money if they have to use debt collectors to try and get the delinquent payments from you and they’re still carrying the cost of purchases you haven’t paid for. 

Talk with your creditors about your financial situation and see if there’s a possibility of working out another payment plan that you can feasibly handle.  They could possibly offer you lower interest rate for a period of time to help you get back on track or at least lower the monthly minimum. 

Exercise this option before the problem is reflected on your credit score to save yourself further headaches.

Credit Counseling

Credit counseling is a very viable option if you are having trouble disciplining yourself with your spending or getting a realistic handle on your financial conditions.  These knowledgeable and well trained organizations can help you put together a plan tailored to your needs to help you free yourself of debt. 

They offer assistance with preparing a budget, understanding your rights, offer advice on over-all money management and provide you with a wealth of valuable information so that you can better inform yourself.

Credit counselors can be reached online, by phone or in person which is probably the most affective option.  Many of these organizations are non-profits that offer their services at low or no cost.  However, there are those out there who are looking to add to your debt by charging excessive fees for the same services. 

So do your homework to find a reputable organization using the internet as well as resources like credit unions, your banking institution, friends and family, or the local consumer protection agency among others.  Definitely stay away from organizations that try to charge high fees before providing any service or ones that refuse to send free information on the services they provide. 

Debt Management Plan

A credit counselor may suggest you use a debt management plan if you are unable to pay your bills or are becoming overwhelmed by increasing debt.  A DMP goes one step further than credit counseling by creating a payment schedule with you for your unsecured credit card debt in which you’ll make deposits to the credit counseling organization. 

The credit counselors work with both you and the credit card providers to reach a reasonable monthly payment which the credit counselors make for you. This isn’t a quick fix option so prepare yourself for plans that could take years to get you debt free.

Just like with credit counselors, those offering debt management plans can be taking advantage of you.  The warning signs of a poor DMP provider include those that try to put you in a plan without giving you money management advice first, with studying your financial circumstances or charge fees before knowing whether the creditor has accepted the DMP.

Debt Consolidation

If no other options are working for you in your current financial situation debt consolidation could be an option.  Debt consolidation loans consist of lumping your debt together to lower the overall monthly costs and make them more manageable. 

However, remember that debt consolidation is a loan that has interest and fees connected to it that could end up costing you a fair amount.  Another point to pay attention to is the fact that many debt consolidation loans are secured with collateral like your home, which you can lose if you don’t repay the loan. 

However, using debt consolidation is a preferable option over your credit score being crippled by increasing debt and there are tax advantages to using debt consolidation which can also help you financially.