3 Strategic Ways To Settle Credit Card Debt [Complete Guide]

By: Yara Pollard

Debts tend to become overwhelming when the amount increases at a staggering rate. The burden of having to pay a specific amount each month topped up with other expenses can take a toll on one’s physical and emotional health.

Despite the advantages of using credit cards, it also has consequences when used in an irresponsible manner. The more you use your credit card without regard to your capacity to pay, the more you accumulate overwhelming debt.

This is a common problem that Americans face today. According to Value Penguin, around 41.2% of households in America have debts from credit card usage. Among that percentage are households that have low net worths but have $10,380 worth of outstanding debts.

While a lot of people can think that it’s the younger generation that would end up incurring a lot of debt, the same study mentioned that credit card debts are more common between the ages of 45 to 54. 

Older people have a misconception that earning more will make spending more okay since they will be able to pay off the debt they incur. What they seem to be missing is that paying off credit card debts is not as flexible as other types of debt.

According to Fox Business, unlike student loans or mortgage plans that have flexible payment methods, credit card debts are subject to higher interest rates. The longer the debt drags out, the more money you will need to pay.

The amount can become twice or more than the original amount that you borrowed in the first place. This is why using credit cards should be taken in a more serious manner.  

Disadvantages of Having Credit Card Debt

If you use your credit card for everyday essentials like gas and groceries, it’s fine if you’re a bit low on cash. If you keep using your card for similar situations but you don’t pay the bill in full each month, it can cause you a lot of trouble..

According to the Federal Reserve, “among the 15% of  families that spend more than what they earn each month, 43% of that population use their credit cards to pay for deficits.” That’s how they get buried with debt.

Debts from credit cards tend to pile up fast. Before you could notice it, you already have a large amount of debt that needs to be paid. Not only will having debts be a disadvantage to your income but also on you and your family’s livelihood as well.

If you fail or refuse to pay for your debt, you end up becoming a delinquent. Credit card delinquency happens when a user fails to pay a month’s balance. But if two months worth of payments have been missed, the case is then reported to major credit bureaus.

According to The Nest, here are some of the other disadvantages of having credit card debts that you will want to keep in mind before using your credit card.

  • Negative Impacts of Your Credit Score
  • Interest and Late Payment Fees
  • Decreased Future Income
  • Negative Impact on Life Goals

Making use of your credit card to build a good credit history or have a better credit score is fine. However, keep in mind that its usage should be done in moderation in order to avoid debts from piling up.

Strategic Ways to Settle Credit Card Debt

  1. Know how much your total debt is

The first step in settling your debt is to know how much you owe on each of the credit cards you own. According to Credit Karma, it is important to note the interest rate and the total amount of each card.

By doing this, you will be able to identify which of your cards hold the high-interest rate. A survey from Northwestern Mutual reports that 1 out of 5 people don’t know the interest rates of their cards. 

Another interesting fact from the same survey also showed that 34% of Americans don’t even have an idea about how much money from their income goes to their debts.

Without knowing how much of your income is being set aside to pay for credit card debts, having a proper budget plan for each month will become harder.

2. Make use of  one or two payment strategies

One of these strategies include paying more than the minimum amount of your credit card statement each month. According to Nerd Wallet, the minimum amount is 2 to 3% of your total balance.

But it’s important to consider that your debt can generate interest for each month that it is not paid in full. Another strategy you can use is automation. By automating payments for your credit card, you avoid missing payment due dates therefore avoiding late payment fees.

Other strategies include debt snowball and debt avalanche. For debt snowball, loans or debts that have the smallest amount get high priority in making payments. On the other hand, debt avalanche prioritizes debts with higher interest rates. It is also a cheaper and faster method as compared to debt snowball.

3. Talk to your credit card company

If you’re having trouble with paying off your loans from using your credit card, there is an option of talking to the issuing company. What most people don’t know is that it is possible to restructure your debt payment process.

To do this, it is best to explain the situation you are facing in a polite and proper manner and ask for your debt to be restructured in a way that you can handle. According to Credit Cards, the initial response of the company might not be what you expect. 

But with persistence and multiple calls, you might be able to persuade them to agree to your terms. Another thing to remember is that documentation is key to having a successful negotiation.

It is important to note the name of the person you are talking to and their position in the company. This will help you identify the people you are talking to in case you need to make follow up calls.

By being excellent at keeping up with your credit card debt, you can enjoy the benefits of soon having a good credit score. With a good credit score, you can have more credit options. 

Even applying to refinance student loans can be a breeze with a good credit score. Begin to build your credit history with these 3 strategic ways to settle credit card debt today.

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