How to Get Out of Credit Card Debt in 4 Steps
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How to get out of Credit Card Debt in 4 Steps
Depending on the amount you may want to consider a DIY strategy like debt snowball or consolidation or even look into debt relief.
Written by Sean Pyles Senior Writer | Personal finances and financial debt Sean Pyles leads podcasting at NerdWallet as the producer and host of NerdWallet’s “Smart Money” podcast. In “Smart Money” Sean talks with Nerds on the NerdWallet Content team to answer questions from listeners regarding their personal finances. With a focus on thoughtful and practical advice on money, Sean provides real-world guidance that can help consumers better in their finances. Beyond answering listeners’ money concerns on “Smart Money” Sean also interviews guests outside of NerdWallet and creates special segments on topics like the racial wealth gap and how to begin investing and the history of student loans.
Before Sean lead podcasting at NerdWallet the company, he also wrote about topics related to consumer debt. His work has appeared throughout the media including USA Today, The New York Times and elsewhere. When Sean isn’t writing about personal finance, Sean can be found digging around his garden, going for runs , and taking his dog for long walks. He lives within Ocean Shores, Washington.
as well as Tiffany Curtis Lead Writer | Health and wellness Tiffany Lashai Curtis is a head writer for the core financial team of NerdWallet. She was previously the health writer for Livestrong.com and freelance writer for publications like Refinery29, Business Insider and MTV News, where she concentrated on problems that affect communities that are marginalized. Being a facilitator of wellness, she has led conversations for groups like Planned Parenthood and Harvard University. She is located in Philadelphia.
Updated Jan 25, 2023 at 9:36AM PST
Edited by Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, managing money and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years with The Oregonian in Portland in capacities such as chief of the copy desk and team director of design and editing. Previous experience included news and copy editing for many Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in journalism and mass communications at Iowa’s University of Iowa.
The majority or all of the items featured on this page are provided by our partners who compensate us. This impacts the types of products we feature and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are entirely our own. Here’s a list of and .
If you’re wondering how to lower your credit card debt Be aware that you’re getting plenty of options. Credit card balances grew by 15% over 2021, the largest jump in over 20 years as per an November 2022 report by the Federal Reserve Bank of New York. [0 The Federal Reserve Bank of NY’s Center for Microeconomic Data . . Accessed Nov 15, 2022.
As of September 2022, the average amount of credit card debt owed by a U.S. household with credit card debt is $7,486 according to .
Successfully requires a hands-on approach starting with deciding on the best method of payment to contacting your creditors to negotiate rates. Learn how to reduce your credit card debt in four steps.
1. Find a payment strategy or two
If you really want to get rid of your credit card debt, think about these suggestions to get to your goal faster. Having a concrete repayment goal and strategy will help keep you — as well as your credit card debt — in check.
Pay more than the minimum
Credit card issuers give you a percentage, typically 2% on the amount you have. Be aware that banks earn money from the interest they charge per period of billing, therefore the longer you take to pay, the more money they make. The average amount of interest on credit cards being paid is rising due to Federal Reserve rate hikes and increasing amounts of credit card debt that is revolving. It’s estimated that U.S. households that carry credit card debt will be paying an average of $1380 in interest on credit cards this year in accordance with the study.
Look on your credit card statement for a “Minimum Payment Warning,” which will have a table showing the time it will take to pay off the balance if you only made minimum payments — and the amount of interest you’d pay.
Debt snowball
The process of paying down the debt you owe uses your sense of achievement as motivation. Your debts are ranked by amount, then focus on clearing the most small one first. Once you’ve paid that, you roll that payment into the amount that you’re making towards the next one, and the next one, and so on. Like a snowball rolling down the hill, you’ll eventually make bigger and bigger payments, ultimately eliminating your debt.
Debt avalanche
Similar to the snowball approach it starts by the list of your debts. Instead in paying the card with your lowest balance, first you then pay off the card with the highest interest rate. This is a quicker, and cheaper, alternative to the snowball method.
Automate
Automating your payments is an easy way to make sure your debts are paid in order to avoid piling up late fees. If you’re using the debt snowball or avalanche approach, however you’ll need to be a bit more involved to ensure that you’re contributing precisely what you’d like to each account.
Worried About the Economy?
Be aware of your finances in face of rising prices as well as economic uncertainty and worries about recession.
2. Consider debt consolidation
If your credit is good but your debt payments feel overwhelming, consider into one account. That way, you only need to make one payment each month to reduce the remaining balance.
Credit card with 0% balance transfer card
It may seem odd to apply for a credit card when your main goal is to get rid of debt from credit cards, but can help save cash in the end. Choose a credit card that has the longest 0% initial period, ideally 15 to 18 months -and then transfer all of your outstanding credit card debt into that account. There will be one payment each month, and you’ll never pay any interest.
Personal loans
In the same way, you could borrow a fixed rate loan to settle your debt. Although you’ll have be paying interest on the loan, the interest prices for personal loans are usually lower than those for credit cards but they will allow you to save money. Use a to estimate your savings.
3. Make contact with your creditors
Contact your creditors to discuss your situation. A credit card issuer might be willing to negotiate payment terms or provide a credit, particularly if you’re a longtime customer with a solid track record of payments.
If your provider offers a hardship program, it may provide relief in the event that circumstances outside your control like unemployment or illness impact your ability to manage payments. And even if you aren’t suffering from illness or unemployment, inflation is causing hardship for many people. Based on the NerdWallet survey, 45% of employed Americans believe that their salaries haven’t grown enough over the last twelve months to keep pace with inflation.
If you decide to discuss with your issuer or accept the conditions of a hardship plan, either option could lead to more affordable rates of interest or waived fees, depending on the issuer.
These small changes might suffice to help you get control of your debt, and the worst you can do is say no.
4. Seek help through debt relief
If the total amount you owe is more than you’re able to pay each month and you’re really struggling to get your debt under control, it could be time to take more drastic steps. Think about, for instance, the debt management program.
Debt management plan
These are developed with the assistance of are created with the help of . Counselors negotiate terms with your creditors . They also help you consolidate debt from your credit cards. You’ll then pay the counseling company a fixed rate each month. Your credit accounts may be closed, and you may have to forgo new ones for a time.
Bankruptcy
Filing for wipes wipes out the unsecured debt, such as credit cards, however, not without consequence. It can assist you in restructuring your debts into a payment plan that spans 3 to 5 years and may be best if you have assets that you wish to retain. It will be at the top of your credit score for up to 10 years, but your credit score is more likely to rebound during the months following declaring bankruptcy. Certain debts, including and tax debt, typically aren’t erased by bankruptcy.
Debt settlement
A debt settlement creditor is willing to pay less than the amount you owe. Even though it may sound like a bargain but it’s not a viable choice for everyone. In general, you employ a debt settlement firm to bargain against your debtors on your behalf. Learn more about the risks you face.
About the authors: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.
Tiffany Lashai Curtis is a senior writer on the personal finance team. She has more than 5 years of experience reporting on topics that affect communities that are marginalized.
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