How to Get Out of Credit Card Debt? Here’s a Guide for You

According to a survey, around 47% of Americans (120 million) had credit card debt in late 2020. This was a significant increase from 43% of indebted credit card holders in early 2020. In addition, 23% of these credit card holders had increased their credit card debt due to the COVID-19 pandemic. Millennials are the largest group of people impacted by unemployment, lack of savings, and more, resulting in increased credit card debt. Every 1 in 3 millennial credit card holders has credit card debt that keeps on increasing every passing day.

 

Are you one of the credit card holders struggling to manage debt? That’s an alarming situation! Here’s a guide to help you get out of credit card debt.

 

A person showing their credit cards

Find the Right Payment Strategy

The best way to avoid credit card debt is to make monthly payments on time. Credit card issuers give you a minimum payment option of paying 2-3% of the balance monthly, but the more time you take to pay, the more interest a bank charges. Therefore, you should look into different payment strategies to pay your credit card balance as soon as possible. Here are some monthly payment strategies you should know and follow.

Debt Snowball

In this first strategy, you can make a list of all your credit card loans, and pay the smallest one at the start. Like a snowball, you’ll continue making bigger and bigger payments, eliminating your debt in no time.

Debt Avalanche

Like the snowball approach, the avalanche approach asks credit card holders to make a list of their loans. However, this strategy is about paying the largest amount first and moving on to smaller payments later. This method is better than debt snowball.

Reach Out to Your Creditors

Do you know that your credit card issuers can negotiate terms with you if you can’t pay your credit card debt? They can offer a hardship program, especially if you’re a long-term customer or have made on-time payments in the past.

 

A hardship program provides relief when you can’t pay your debt due to unforeseen circumstances like illness or employment. In addition, with proper negotiation, you can get waived off payments or a minimized interest rate. These changes in terms can make a huge difference!

Seek Debt Relief Options

You should consider debt relief options if you’re seriously struggling to pay your credit card debt. Debt management plans allow you to hire a counselor that negotiates with your credit card issuer to waive off your debt. Afterward, you must pay a fixed monthly amount to the counselor for some period. Another debt relief option is hiring a debt settlement company. They try to reduce your debt on your behalf on certain terms.

 

A person using a credit card to make a payment

Learn More About Paying Credit Card Debt from Francisco J. Faraco

You can try paying off your credit card debt with these strategies and tips. However, for more knowledge, Morgan Francisco Faraco, a CFA Charterholder, is the man for you! He is currently associated with the University of Chicago as a teaching assistant for Financial Mathematics students. He has been living in New York for the past 12 years and has worked with multiple banks and organizations.

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