You may not want to hear this but the best advice for dealing with credit card debt is, of course, not to get into it. If you pay off your balance or balances at the end of each month, you’ll not only be money ahead but you will eliminate all that stress and strife that goes hand-in-hand with being seriously in debt.
The second best advice
If you are having a big problem with credit card debt, the best advice won’t do you much good. But here is the second best advice – do whatever possible to get out of debt. Credit card debt is expensive. In fact, if you check out the interest you’re paying on your credit card or cards, you’ll probably find that it’s in the neighborhood of 20% APR. In other words, if you have $10,000 in credit card debt and are paying $300 a month, you would pay back a total of $13144.77 or more than $3,000 just in interest charges. If you were to stretch that out to five years at $400 a month, you would pay a total of $15097.82 or nearly $5,100 just in interest.
What happens to your credit score
Having a serious amount of credit card debt can also damage your credit score. It’s said that 35% of your credit score is based on your credit usage or how well you’ve handled your credit and 30% on the ratio of your credit card debt to your total available credit or revolving credit limit. In other words, 65% of your credit score will be based on how well you’ve managed your credit cards and how much debt you’ve accumulated. If you’ve not handled your credit card sensibly or if you have used up too much of your available credit, your credit score will definitely be damaged.
What to do about that credit card debt
If you have too much credit card debt and accept the fact you need to do something about it, there are options. For example, you could use a technique called “snowballing” your debt. Here is how this works. First, make a list of all your credit cards, your balances and interest rates. The best way to do this is with a spreadsheet program as it would allow you to then check out some alternatives. For example, you could order your debts by highest balance to lowest balance, highest interest rate to lowest interest rate or conversely by lowest balance to highest balance and lowest interest rate to highest.
Make a choice
Your next step would be to decide how you want to pay all those credit card debts. The two most common ways to snowball them is to first pay off the highest balance credit card or pay off the card with the lowest balance first. If you pay off the credit card that has the highest balance first, this will free up the maximum amount of money that you could then use to next begin paying off the credit card with the next highest balance. On the other hand, if you would like to see some immediate progress you might choose to pay off the card with the lowest balance first, then move on to the one with the next lowest balance.
If your credit card debt is completely out of control
If you spreadsheet your credit card debts, total up your balances and find your debt has spun completely out of control, you might want to look into debt settlement. This could be your best option for dealing with credit card debt because only it can be used to reduce your balances, which can help you get out of debt faster than snowballing them or even borrowing money to pay them off. Check with us either by phone or by filling out the form you’ll find on this page to learn more about debt settlement whether or not it could help you.
National Debt Relief helps people nationwide resolve $10k or more in unsecured debt. Our debt coaches negotiate with creditors on your behalf so that you pay a fraction of what you owe and can become debt free in as little as 24-48 months.
