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Credit Card Debt Help & Advice to Reduce Debt Fast

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HIGHLIGHTS
  • Evaluate your situation and what your credit card debt problems are.
  • Use a budget, and juice your budget. Stay within the guidelines for each major expense category.
  • If you have a debt problem, get a credit card debt consolidation solution fast!

Tips and Advice to Manage Credit Card Debt Effectively

Credit Card Debt Tips

Credit card debt is at an all time high, with almost one trillion dollars in revolving US consumer debt and $95 billion in credit card debt charging off each year. With rising costs of living and a struggling economy, it's getting harder to get ahead and keep up... especially if you are bogged down with credit card debt. But you can find your way out of debt and a path to a healthy financial future, and Bills.com is here to help. All you need is determination and a willingness to do what it takes, combined with some tips on how to effectively manage credit card debt.

Bills.com is here to show you the way out of credit card debt. You have several options for consolidating debt, which will make it easier to manage. Consolidation isn't the only step though. You also have to find ways to reduce expenses or increase your income. We'll show you how to create a budget and then plan to get free of credit card debt.

Quick tip #1:   Get a no-cost, no obligation analysis of your debt options from a pre-screened debt relief provider.

Here are three basic tips for how to manage troubling credit card debt:

Tip #1: Use a Budget

A solid financial foundation starts with a game-plan, and in personal finance the blue-print for that plan is your monthly budget. Make sure that you know what is coming in (your income) and what is going out (your expenses) each month. And, make sure that all systems are set for a healthy budget. Fundamentally, make sure that you bring in more than you spend. If your expenses are more than your income, it is time for a change - which means finding ways to quickly juice your budget. Bills.com has a free budget guide to help you get started: Free Budget Guide.

It can vary a bit based on where you are in your life (earlier in life you will be increasing your earning potential and may have student loans or a mortgage, and later in life you might lower your income and live off of your nest-egg), but our general recommendation is to strive to save about 10% of what you bring in as income each month. Aim to keep your debt payments below 15% of your take home pay and any payments toward housing, e.g., rent or all mortgage plus taxes and fees, should typically remain below 35% of your income each month. If any of these are significantly out of whack, you should re-evaluate your budget.

Tip #2: Juice your Budget and Increase your Cash-flow

If your budget leaves you with an empty feeling in your stomach, it might be time to look for ways to juice your budget. There are only two things that you can change - 1. increase income, or 2. decrease expenses. Since switching jobs or finding additional income streams is usually a lengthy process we recommend starting out by decreasing expenses. The obvious places to start trimming is discretionary expenses, such as cappuccinos and movies and dinners, but there may be some big savings in areas like lowering mortgage payments with a refinance loan or bidding out for new insurance rates and coverage too. Usually, the biggest bang for your buck, though, is to get rid of credit card debt. Unsecured debts, like credit card debt, is a waste of your hard-earned dollars since it doesn't build wealth or get you anywhere (like a mortgage or student loans or business loans) and it's usually the highest cost debt you can incur.

Tip #3: Get out of Credit Card Debt, and If You Have Too Much - Find a Debt Consolidation Solution

OK, so now you have your budget, you know where you need to cut back and where you can improve - but you still have that nasty credit card debt weighing down your budget and your life. What you need to do is to find out where you stand and how you can solve that debt.

If you have problematic credit card debt, there are many different debt relief options - including credit counseling, debt settlement, bankruptcy, debt consolidation and even bankruptcy if your debt is debilitating. You can take control of your situation and get out of debt with one or more of these five options:

Bills.com has created individual solution pages within the debt portal, but here is a quick summary of each one to get you started as well.

Credit Counseling

Credit counseling is a program that enrolls you on a debt management plan (DMP) which usually allows you to qualify for a concession rate from your creditors for lower interest rates and lower payments. The plan should include reduced interest rates, lessons in budgeting and money management, or a comprehensive debt management program.

Debt Consolidation

You may be able to consolidate your debts with a home equity loan, mortgage refinance or other debt consolidation loans. If you're confident that you'll be able to make the payments without building more credit card debt, debt consolidation can be an excellent way to reduce your payments and possibly reduce your taxes. You usually must be a homeowner to qualify for most debt consolidation loans. You can apply with Bills.com's approved debt consolidation lenders here: Debt Relief Quote.

Debt Negotiation or Debt Settlement

Debt settlement services offer to negotiate and settle your debts for less than you owe, many times reducing debts by as much as half. Debt settlement is an option for people who cannot afford their monthly payments, and who are not worried if their credit rating will be negatively impacted during the program. It's important to be aware that you are NOT making monthly payments and staying current on your debts while enrolled in a debt settlement program, so be aware of the credit impact and the potential collection harassment from your creditors.

Self-Help Debt Relief

The easiest debt relief options are things you can do yourself, as covered above, like budgeting and juicing your budget.

  • Tracking your spending
  • Checking your credit reports
  • Negotiating with creditors for reductions

Track your spending - Write down every penny you spend for one month, including monthly bills, automatic payments and bank charges. If you see a lot of unnecessary expenses like $10 weekday lunches or $4 magazines bought at a newsstand, cut those expenses and use the savings to pay down your debts.

Check your credit reports - The government provides three free reports a year at Annual Credit Report and 4 out of 5 people's reports have errors. If you have errors on your report, take the steps to have them removed, because they could be damaging your credit and causing you to get higher interest rates when you apply for credit.

Negotiate with creditors - Call your creditors and ask them to reduce your interest rate in order to keep you as a customer. If you know a payment will be late or you can't pay it, call the creditor before the due date, to ask for flexibility, arrange a new payment plan, or inquire about their hardship programs.

Bankruptcy

Bankruptcy should be your last choice for getting out of debt because it will damage your credit for 7-10 years and, depending on which type of bankruptcy you file for, you could be forced to give up some of your assets or assigned a long-term payment plan. There have also been legal changes put in place by congress that makes if more challenging to qualify for a Chapter 7 Bankruptcy, forcing many people to file for a Chapter 13 Bankruptcy which is really a repayment plan.

OK, so now you are armed with the credit card debt tips and solutions to start your journey.  Get on the right path and stay committed to getting rid of that nasty credit card debt and on to a bright financial future.

Comments (46)


Valerie M.
Wilmington, NC  |  April 19, 2012
I believe I am Judgment Proof. My husband owns our house free and clear but the title is in his name only. So in North Carolina even though my husband owns property creditors cannot come after him if I am not on the title. Non-Community I believe it's called. Also, I do not work and only own a 1998 Camery car. I have no property except my car. I am thinking about meeting with a bankruptcy attorney to to sure that I am Judgment proof. If I am, I understand that I should let my creditors know that I met with an attorney and that I am judgment proof. I suppose then can still sue me but I can't amagine that will get anything. Can you please give me your thoughts on this. Thank you so much!
Bills.com
April 19, 2012
"Judgment-proof" is not an official classification recognized by law like being male, female, married, or a resident in a certain state. It is, however, a practical reality for judgment-creditors trying to enforce a judgment. Your calling yourself judgment-proof will not necessarily cause your creditors to stop pursuing you. In time, and with evidence, the judgment-creditors may come to consider you judgment-proof, but that is for them to decide.

Consulting a bankruptcy lawyer to learn your options and possible liabilities is an excellent idea I encourage.
Frank M.
April 13, 2012
I am from california I have a debt almost 7 years old if I move out of the country and they contact me does that cause the sol to be invalid even if I was living in Ca when the sol took effect?
Bills.com
April 18, 2012
Leaving the country can place the SOL on hold. SOL issues are complicated. If you are seeking legal advice, then speak to a lawyer, experienced in consumer law.
Frank M.
April 13, 2012
if the sol is up and a creditor contacts me and I tell them if they want to mark the debt resolved for 500 dollars does that cause the sol to restart?
Bills.com
April 18, 2012
It is not a wise idea to reaffirm a debt, as that can cause the SOL to restart. If you intend to negotiate do not acknowledge the debt either by phone or in a letter.
Frank M.
San Marcos, CA  |  April 13, 2012
I have two cards that are 8 yrs old. I had a credit repair start to repair my credit and may have disputed them before the SOL was up. Would that count to extend the SOL? I have not made any contact or paid anything since 05 though I hired a credit repair in 09, which disputed them. Would that cause the SOL to be invalid?
Bills.com
April 13, 2012
People often mix the rules for state statutes of limitation for debt and the federal rules for credit reports. The two are separate from each other. If the credit repair company you hired disputed the debts with the credit reporting agencies, which is what they probably did, then this had no impact on the clock for your state statute of limitations. However, without knowing exactly what steps your credit repair company took, it is impossible to say that with 100% certainty.
Frank M.
San Marcos, CA  |  April 12, 2012
My question is in California I have two cards that are way past sol my question is they have been purchased by another lender possably before the sol was up it has been 7 years since I made any contact or payment to the cards My question is if they purchase the credit debt do they have another 4 years from the time they purchased it or is the sol still valid from the first non payment or delinquency as I now have accet acceptance trying to contact me I have not called them back but want to do so and let them know the sol is way past and maybe offer them something to remove it and stop reporting it also since it is close to if not more then 7 years since first delinquency do they have to stop reporting it soon? or do they go buy 7 years from when the new creditor purchased the debt?
Bills.com
April 13, 2012
People often confuse and mix the rules for state statutes of limitation for debt and the federal rules for credit reports. The two are separate and independent of each other, and need to be analyzed separately.

As you mentioned, the California statute of limitations for contract debt is 4 years. The 4-year clock starts running from the date the payment was due, or the last payment was made, or a reaffirmation/acknowledgment was given. No other events, such as an original creditor selling the account, or one debt collector selling the account to another debt collector matters to a California court.

You mentioned the FCRA 7-year rule. This time limit sets how long a derogatory can appear on a person's credit report. It, as I mentioned, has nothing to do with the state statute of limitations, and the state statute of limitations has no impact on the FCRA 7-year rule. The key date here is the date of first delinquency. No other events, such as an original creditor selling the account, or one debt collector selling the account to another debt collector matters under the FCRA.

Follow the links I mentioned in this comment to learn more about these issues.
Joseph E.
Jacksonville, FL  |  April 04, 2012
I was just informed by a major creditor(cap one) that in west virginia they are no longer allowed to settle unsecured debt and any payments will be considered voluntary. Is there any basis to this statement?
Bills.com
April 04, 2012
Joseph, I don't know the answer to your question. It seems odd that a creditor could not choose to settle an account, if it wanted to. Perhaps this has something to do with a settlement that was reached between Cap One and the State of WV earlier this year that made the news.
Susan P.
March 20, 2012
I have a debt collector acting like a law firm on a discover debt from 2008 which is a identidy theft from my roommate trying to make me think this is a valis debt. What do I do???
Bills.com
March 20, 2012
I am not certain I understand your question. You mentioned a Discover account that may have been subject to identity theft. See the Bills.com resource Identity Theft Recovery that may answer your question. Please ask any follow-up questions on that page.
Stefanie B.
Raytown, MO  |  March 12, 2012
i have 11,000 in credit card debt. i haven't paid on any of my cards in 2 plus years. i just got a letter from midland funding saying they were starting a suit against me. I owe roughly 2700 to them. I just got my tax refund, 1500, and am wondering if i should try to settle with them, file bankruptcy, or try a debt settlement plan. since they have already started the court process would they still settle? my credit score is like 550 or so, so i am thinking that trying to pay in full won't really matter anyway since my score is already so low. please help!
Bills.com
March 13, 2012
Trying to settle is a good idea. It is certainly possible to settle a debt even after you are sued. Start with a low offer. Consult with a bankruptcy attorney. If you find out that you are eligible to discharge your debts, you can use that as leverage in negotiating settlements.

Look into the laws in your state that govern collection, to find out if your wages are at risk for garnishment, if you end up with a judgment against you.
Aaron H.
Columbia, MD  |  March 04, 2012
I had a car reposessed and charged off in august 2010, but not for a lack of payments rather a different legal issue. I wanted to keep the car having never missed a payment,but BB&T chose to sell it at auction. Since then I have been paying $120 a month towards the remaining balance of $8000, because the auction prices are much lower than the market value. The charge off and repo are already on my credit, but my score is still pretty good since this is the only negative thing on me. I received an offer from BB&T to settle the debt for half of the remainder, but they also said they will mark it as settled for less than the full amount on my credit, and send me a 1099 at years end for the difference. I'm wondering if I should even still continue paying the balance at all since it has already done it's damage on my credit? What will happen if I simply tell them I'm done paying, which I'm happy to do since I wanted to keep the car in the first place.
Bills.com
March 05, 2012
If you tell them that you are done paying, then they can sue you, garnishing your wages and levying your bank accounts, if a judgment is obtained against you. If you can afford the settlement, that seems like a wiser choice to me.
Jenny H.
February 26, 2012
I have $30,000 in credit card debt at 9.5% interest and can only afford to make the minimum payments on my credit cards. I have $20,000 in my Roth IRA. I have not contributed anything to the Roth in over five years, and it started out as a Roth IRA. I am 29 years old. I am thinking about cashing in my Roth IRA and using it to pay off my credit card debt. If I do this, I would take the amount I am paying for minimums ($350) and would put that money back into the Roth. According to my calculations, I would be able to replenish the Roth in four years. Is this advisable?
Bills.com
February 28, 2012
Jenny, your basic premise is sound. It makes financial sense to pay off high interest debt with funds that are earning less money than you are paying on the debt. However, I am not to sure about all of your assumptions.

If you are currently making a $350 payment on $30,000 (which is lower that the standard required minimum payment for a $30,000 debt), then it will take about 12 years to pay off the credit card debt. If you take out money from your IRA account, make sure there are no taxes or penalties on the withdrawal. In general you don't pay an early withdrawal penalty on the amounts deposited, but you will pay a 10% penalty on the earnings. Check with a tax professional before making any withdrawal.

If you withdraw only $20,000, then you will still need to make payments on the remaining credit card debt and this will leave you with less money to replenish your Roth account. Budget carefully to make sure that you are paying off the remaining debt as quickly as possible and continue to replenish your IRA Roth account.
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Ken G.
Beaverton, OR  |  April 21, 2012
You need to understand that raiding your retirement savings to pay off unsecured debt is fraught with risk. Not only may you be subject to fees, penalties, a potential taxation event, and a diminished retirement, but you are trading exempt assets for unsecured debt. If a creditor decides to sue you over a debt, generally your retirement funds are not able to be attached to pay any resulting judgment. Forget the math; if for some reason you default on the debt remaining after using your retirement assets to pay down the initial debt, you have lost $20k that you ordinarily would not have lost and still end up with a judgment against you.
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