If you are drowning in credit card debt, or have collection agencies calling you at work and at home, it’s understandable if you feel overwhelmed right now. However, you can get your credit card debt under control, eliminate it, and show the credit card companies that you can handle credit responsibly. Here are some useful tips for getting out of credit card debt for good.
Work with the credit card issuer
If you sense that you won’t be able to make next month’s credit card payment, proactively contact the credit card issuer yourself. Explain your situation to the company and ask for a lower monthly payment, a lower interest rate, or both. Most credit card companies are reluctant to resort to a collection agency to collect on their debts, since this results in your debt being sold to an outside agency for pennies on the dollar.
Pay more than the minimum
If you ever hope to reduce and eventually eliminate your credit card debt, you must pay more than the credit card’s minimum monthly payment. Even if the additional amount is only $100, every little bit of extra cash helps you on your journey to getting out of debt.
Transfer your balances
Many banks and companies offer zero or low annual percentage rate (APR) balance transfer credit cards to new credit card holders as a promotional incentive. Usually, balances from other credit cards can be transferred to these new cards. If you are able to obtain such a card, transfer as much of your high-interest credit card debt to it as you can. Then, try to pay off this debt before the promotional period ends.
Use only cash
Once you start paying off your credit cards, it is easy to fall back into the routine of using them to make purchases. If you do this, you will never be able to reduce your credit card debt. The solution is to use only cash when you make purchases. Using cash also makes you more aware of how much money you are actually spending on various items.
Once a credit card is paid off, destroy it
It is very tempting to go back to using credit cards that are no longer “maxed out,” especially if the cards have a very high spending limit. Once a credit card is fully paid off, destroy it. This will prevent you from sabotaging your own efforts to stay out of debt.
Keep one or two credit cards
Credit cards do make certain purchases easier (e.g., hotel reservations); however, there is no reason why you should keep five or more credit cards. One or two low-interest credit cards should be sufficient; the rest should be destroyed or made unavailable (e.g., placed in a safe deposit box) for use only in an emergency.
File for bankruptcy
If you simply cannot reduce your credit card debt by cutting back on purchases and even taking on an extra job, the best resort may be to file for bankruptcy. Granted, your credit will be ruined for seven years, but you’ll be able to start fresh. This may be your best option if you see no other way to pay off your credit card debt, or your credit card issuers refuse to consider a mutually beneficial debt payment plan.
