Credit Card Debt Help & Advice to Reduce Debt Fast
- 7 min read
- 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!
Table of Contents
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 living costs 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 your options and finding the best option.
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 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, budgeting and money management lessons, or a comprehensive debt management program.
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 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.
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2022 was $16.91 trillion. Housing debt totaled $12.26 trillion and non-housing debt was $4.65 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Each state has its rate of delinquency and share of debts in collections. For example, in Louisiana credit card delinquency rate was 5%, and the median credit card debt was $355.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.
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.
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.