Dealing With Credit Card Debt: A Step-by-Step Guide

Whether you have more or less debt, paying off your credit card debt is always a good idea. Before and after you make a big purchase, whether you’re using it to pay bills and groceries, or just after spending it on points. Make sure the slate is as clean as possible. And if you can’t, consider using your credit less, if you can.

About 60% of Americans have a mortgage, according to a report by Pymnts.com. And as inflation continues, credit card customers continue to struggle to make their own minimum wagewhich leads to damage credit cards and interest rate increases that consumers will have to pay.

The average American credit card is $5,910according to CNET sister site Bankrate. And there is growing concern that more credit card accounts will become fraudulent as borrowers default on payments.

If you’re struggling to make credit card payments, we have some options that can help you stay on track while you’re trying to pay off your debts. For more information, here it is The best credit cards.

1. Call your credit card company and explain your situation

As soon as you realize that you cannot make the minimum payment, contact your credit card company to find out about your situation. If the company does not know, it can assume the worst and can take action. Notifying your credit card issuers can help you avoid any negative consequences and put you in control.

Your credit card company can set up a payment plan that you can afford. The lender can also move your payday to work with your payday. It may also be possible to negotiate a lower APR – the annual interest rate you pay on your credit card balance.

Whatever you do, write down the details. Bruce McClary, Senior Vice President of Communications at National Foundation for Credit Counselingtold CNET that you should make sure you get a valid confirmation and policy for any changes to your account from your credit card provider in case things don’t go your way.

The credit card issuer may also have a relief or hardship (see below) that hurts your credit more than a delinquent (late account) or having your account. he was suspendedmeaning that it is recorded as a loss and will not be paid in the future. When this happens, your credit utilization ratio increases, which can lower your credit score. It can also lower your credit score, which affects your credit score.

2. Try debt counseling or a debt management plan

Another way to help with credit card debt is to look for organizations that don’t offer credit counseling or debt management programs that can help with budgeting.

“A debt management program allows you to get back into your budget, and you benefit from lower payments and interest until you pay off your account,” McClary explained. These programs can help you find a long-term solution with your creditors based on your budget, making payments more sustainable. They can too negotiate with creditors on your behalf creating a new payment plan.

Rod Griffin, senior director of consumer education at Experian, recommends that you contact your attorney’s office or Consumer Financial Protection Bureauand research consumer.gov for all your choices.

3. Reorganize your budget and find a place to save or find more

If you are facing budget problems that are making it difficult to pay your bills, consider reducing your monthly expenses and applying for government assistance. There are programs that will give you the opportunity to pay your electric bills – for example, the Low Energy Home Energy Assistance Program. States also provide rent assistanceand also Temporary Assistance for Destitute Familieswhich helps with food, housing, household energy, childcare and job training.

Next, consider restrictions promotional activities or cable, reduce purchases and return unwanted recent purchases. Try to eat at home more often and also limit the restaurants and specialty coffee. If possible, work from home save money on gas. You can also use “pay as you go” car insurance options if you don’t drive often. These small changes may not be enough to pay off your debt, depending on how much debt you have, but your savings can add up over time.

Once you’ve nailed your savings opportunity, start looking for additional ways to make more money on the side. Go to your pantry and electronic devices and list products on programs such as eBay, Mercari and Poshmark. You can start a side trip or sign up to become an Uber or Lyft driver. You can also rent your own car Teaching when you are not using it.

4. Transfer your money to a 0% APR credit card

If your credit is still good enough — for example, you’ve never missed a payment — consider applying 0% introductory APR credit card is transfer your levels. You’ll need as much as $670 to take advantage of one of these cards, but transferring your credit card debt to a 0% APR card can save you time and money trying to pay off credit card debt.

However, if you’re already in financial trouble and can’t pay off your current balance, this may not be the best option for you because you’ll be expected to make payments on your new card, even during the opening process. If you don’t, your 0% APR period may end early.

If you can’t afford a 0% introductory APR and have high credit card balances, consider applying debt consolidation loan. Your loan will still carry interest, but you’ll only have one payment and you’ll be able to earn less.

Disadvantages of credit card hassle software

Although you won’t see them advertised much, many lenders offer complicated programs that help you pay off your credit card debt. These terms vary by lender but may include options such as skipping payments or reducing your down payment or your APR. In most cases, you must apply for the program by contacting the lender, but there may be other points. For example, you may need to provide evidence that you are experiencing hardship.

However, these programs have several problems that can damage your credit. This is what they are.

1. Paying off your debts less than you originally agreed upon

If you pay off your loan at a slower rate than you originally agreed to – for example, if your original loan was $15,000 but you paid $10,000 – it could damage your credit because you didn’t meet your original obligations. On the other hand, McClary adds that while you’re focusing on paying off your credit cards, you should prioritize paying off your debt over your credit card debt — paying off your debt will have a bigger long-term impact than managing your long-term debt. .

2. Creditors may reduce your credit limit or close your account

The credit card company may reduce your credit limit or close your account when you make a payment, which can affect your credit score. A lower credit limit can affect your credit utilization ratio (the ratio of your income compared to your credit limit) – the main component of interest payments – because the total amount of credit you have used will increase.

If your account is closed, your credit age (the length of all your accounts divided by the number of accounts), another component of credit, will decrease. The credit utilization ratio and the length of the credit history are two important factors in your credit score.

3. Sign up for a crisis program, especially

Just signing up for a hardship plan can hurt your credit, WalletHub analyst Jill Gonzalez told CNET. “Your credit card issuer can put notes on your credit report that can alert other potential creditors to your financial problems.”

Because of the negative effects of complex programs, Griffin says that it would be better to use a good program to help with a financial advisor instead.

For more information, here it is how to get rid of credit card debt. Also, here it is What you need to know about debt consolidation and how it hurts and helps your credit.

If you want to build your bad credit but need tools, check out our recommendations for best credit cards for bad credit and The best credit cards for good and average credit. Using these cards in conjunction with best ways to improve your credit it will help you to save your money.