Credit Card Debt Help & Advice to Reduce Debt Fast

Updated: May 29, 2014

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!
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Tips and Advice to Manage Credit Card Debt Effectively

Credit card debt is at an all time high, with almost $1 trillion 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.

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 credit card debt freedom.

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 no-cost, no-gimmick budget guide to help you get started.

Put a little aside in your savings each month. How much 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. 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:

  • Increase income
  • Decrease expenses

Switching jobs or earning additional income is usually a lengthy and difficult process. We recommend you start out by cutting expenses.

The obvious places to start trimming is discretionary expenses, such as cappuccinos and movies and dinners. You will make a larger impact on your budget if you can restructure your major expenses.

For example, you could save a lot of money if you can lower your mortgage payments with a refinance loan. Shopping for for new insurance rates and coverage could yield significant savings too. See the Bills.com article 13 Quick Ways To Save Money for to learn other cash-saving tips.

Often, the biggest bang for your buck, though, is to free yourself from your credit card debt. High-interest cards are the worst if you carry a running balance. Paying all that interest is a waste of your hard-earned dollars. It doesn’t build wealth or advance a long-term financial goal (unlike a mortgage or student loans or business loans).

Tip #3: Find a Debt Consolidation Solution to Get Out of Credit Card Debt

Once 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 how you can solve your debt.

If you have problematic credit card debt, there are many different debt relief options — including credit counseling, debt settlement, debt consolidation and even bankruptcy.

You can take control of your situation and get out of debt by reviewing all your options and finding the one that’s best for you.

Start by looking into these five options:

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

Credit Counseling

Credit counseling enrolls you in 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.

The lowest interest rates on a consolidation loan are available if you’re a homeowner with equity and do a cash-out refinance loan. Using your home’s equity can be a wise choice, as long as you’re confident that you’ll be able to make the payments each month and avoid building up credit card debt again. A cash-out refi can reduce the size of your monthly payments and possibly reduce your taxes.

There are unsecured consolidation loans available, though rates are higher than on a home loan. Look at banks, credit unions or peer-to-peer lenders. You need strong credit to get the best rates.

If your credit is not excellent, but is improving, and you’re looking for an unsecured loan, speak with one of the consultants at FreedomPlus.

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 you are not making monthly payments and staying current on your debts while enrolled in a debt settlement program. 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.

Legal changes put in place by Congress make it harder to qualify for a chapter 7 bankruptcy. This has forced 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. so you can focus on building a bright financial future.

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58 Comments

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  • DC
    Apr, 2013
    Denise
    College Station, TX
    I defaulted on 4 credit cards. Two settled over a year ago. I paid off with settlements then had to claim the rest (that they relieved me of) on my taxes. I have two more that have not been settled and it has been since 2008. I received a call today that one is at $8000. I can't pay any lump sum and have no way of doing so. Can they place a lien on my house as they have threatened? I can't even remember what the other credit card is. Is there a way to find out what it is and if they have wrote it off? Is there a time limitation? I need to buy a new car, am I going to be able to get a loan? I greatly appreciate your help.
    0 Votes

    • BA
      Apr, 2013
      Bill
      A credit card creditor must obtain a judgment in court before it can place a lien on your real property.

      Your first step should be get a free credit report at annualcreditreport.com. Check to see when your date of last payment on the debt was. That will determine the date you use to calculate the statute of limitation on debt in your state. If the SOL has passed, be sure not to make any payment, as you can restart the clock on the SOL by doing so.

      Whether you can obtain car financing at a decent rate depends on your credit score, as well as whether there are judgments against you. Once you figure out the SOL issue, check with a bank or credit union to learn if you can obtain a car loan, how much you can borrow, and at what interest rate.
      0 Votes

  • LB
    Mar, 2013
    Lindsay
    Lebanon, OH
    I have been unable to pay my Citi credit card since October. I got a letter in the mail saying that unless I establish a payment arrangement within 30 days they are filing a lawsuit. I do not have any sort of income right now. I owe $3,550 (began at $2,990 before fees). I start college in two months and may be able to pay with student loans. Should I pay this card off with student loans? What is an acceptable payment arrangement? I do not want them to think I have a stable income.
    0 Votes

    • BA
      Mar, 2013
      Bill
      Generally, I do not recommend people pay-off existing debts with student loans. Student loans are intended to provide for your education, which has the potential to boost your income later. Short-circuiting your education by misdirecting your student loan strikes me as short-sighted. Two recommendations:
      • Consult with the Bills.com Debt Coach tool for an online, no-cost, no-nonsense analysis of your situation.
      • Call your county bar association today and ask for the names of local organizations that do pro bono (no cost) work for low- and no-income people in your area. Make an appointment with one of the organizations, and bring all of the documents you have regarding the debt to your meeting — especially the menacing letter you mentioned. The lawyer you meet with will advise you of your rights and liabilities should Citi or its collection agent file a lawsuit against you.
      0 Votes

  • TH
    Jul, 2012
    Teresa
    Thomasville, NC
    I have a question. my mother got herself in a lot of credit card debt. She doesn't have a way of paying the bills. Shes on a fixed income social security. I have no way of helping her. She's 75 years old and doesn't have any other means to pay it. She lives in a home that she owned but I own it now as of a year and a half ago. It's in my name only. They have put a lien against her and her properties. but she doesn't have anything. Can they put a lien against me and my property since she owned it?
    0 Votes

    • BA
      Jul, 2012
      Bill
      First, read the Bills.com resource Social Security Garnishment to learn more the Social Security issue.

      Second, if the home your mother resides in is titled in your name and not hers, then your mother's judgment-creditors have no claim to your property.
      0 Votes

  • SL
    Jun, 2012
    Steven
    Cedar Grove Twp, NJ
    We are in NJ. A default judgment was entered in 2002, against my wife, regards a bad check. Amount is approximately $800. She is unsure if she was served, and does not have records to prove she wasn't. However, the creditor, a car dealership, has been bankrupt and out of business for several years. We corresponded with the attorney of record and he informed her all records for the company were lost in a flood and has no info regarding the matter. Should she file to vacate the judgment? What other grounds, besides improper service may be argued to vacate a judgment? Thank you.
    0 Votes

    • BA
      Jun, 2012
      Bill
      Take the judgment to a lawyer who has civil litigation experience, and preferably one who has appellate experience. The civil procedure rules for judgments are exact and usually interpreted strictly by judges. The plaintiff/judgment-creditor here may have missed deadlines, filed the judgment improperly or at the wrong courthouse, or referred to the wrong case number, and so on. There is really no limit to the number of things a judgment-creditor could have screwed up. A sharp-eyed lawyer who knows New Jersey civil procedure rules may find something sufficient to use for an appeal.
      0 Votes

    • KR
      Jun, 2012
      Ken
      Beaverton, OR
      A "sharp-eyed lawyer who knows New Jersey civil procedure rules may find something sufficient to use for an appeal" will demand a retainer of at least $5,000. On a judgment for $800, something tells me it may be the judgment debtor looking at bankruptcy next.
      1 Votes

    • KR
      Jun, 2012
      Ken
      Beaverton, OR
      Bankruptcy of the judgment creditor is not grounds for having a judgment vacated. All debts owed a bankrupt judgment creditor pass to the ownership of the bankruptcy court trustee as representative of the creditors for distribution to the creditors. You may or may not have grounds due to defective service. I would first check what the requirements are for proper service as they can be quite liberal. Personally, I would just leave it alone. A 2002 judgment will not appear on your credit reports and, if as you say, the judgment creditor went bankrupt then nobody will be after you to collect on the judgment unless you attract the attention of the bankruptcy trustee.
      0 Votes

  • HW
    Jun, 2012
    Holly
    Santa Ana, CA
    I have a question re: SOL in CA. I understand the SOL is an affirmative defense and that collectors can still initiate a lawsuit (none have yet), but I just want to know if my debt is outside the four year statute of limitations. I feel like I would have more leverage to negotiate the debt if I am certain the SOL has passed. Here are my facts: My credit report indicates I was 30 days late in March 2008 on one card and 30 days late in April (I can't find the date of the last payment I made or when the last payment was due). Is it safe to assume Breach of Contract (BOC) occurs/Cause of Action accrues: April 2008, March 2008, or February 2008? That is BOC on first card is March 1 and BOC on second card is April 1? I filed bankruptcy on July 16, 2008. The bankruptcy was dismissed (yes, dismissed, not discharged) on November 6, 2008 because I did not meet the means test for chapter 7. Trustee wanted to convert to chapter 13 and I opted to take my chances with the creditors. I calculate that the SOL runs out for sure by August of this year? Thoughts?
    0 Votes

    • BA
      Jun, 2012
      Bill
      Please see the Bills.com resource California Statute of Limitations for Contracts for a general discussion of when a cause of action for breach of contract accrues in California. The discussion on that page is much more specific and accurate for California readers than this article.

      Relying on a credit report to find an accurate date of first delinquency is problematic because even though creditors are supposed to, under federal law, make accurate reports to the credit reporting agencies, they sometimes do not. Therefore, take anything on your credit report with a grain of salt.

      Look at the date of first delinquency on each account. Assuming the reports are accurate, and that's a mighty big assumption, I would look to that date as the start of the statute of limitations clock for that account. Add to your four-year clock the eight months these accounts were stayed by the bankruptcy. The result should be when the clocks run out. However, as I pointed out, I made an enormous assumption here.

      I agree with your thought that a consumer's leverage increases exponentially when the state's statute of limitations for breach of contract runs out. Consider a pay for delete to reduce the harm the account causes your credit score.
      0 Votes