Help with Credit Card Debt
If you need help paying off credit card debt, you are not alone. Americans owe more than $931 billion on their cards. Just making minimum payments will keep you trapped in a cycle of high interest debt for years. Get help today.
Choose Your Debt AmountGet Credit Card Debt Help Now
Ah, the credit card. Easy to get, lovely to hold, and for those hardwired to instant gratification, absolutely fabulous to use.
In fact, now that the Great Recession is a mostly a bad memory, we’re scratching the itch of our enduring denial with a spending binge. It might even be patriotic to whip it out. After all, 70% of the nation’s economy is fueled by consumer spending.
But wait: Problems quickly arise when your credit card balances outstrip your ability to pay them off each month. Soon enough, you’re looking for credit card debt relief options.
And, boy, are we spending more. In the fourth quarter of 2017, consumer debt — excluding mortgages and other home loans — surged 5.5%, to a whopping $3.82 trillion. That’s a record, according to the Federal Reserve Bank of New York, which has been tracking such statistics since 1999.
Here’s another: Consumers’ non-housing debts accounted for nearly 30% of their overall debt load. Listen, it can happen to the best of us. One of the knocks on Supreme Court (as this is written) nominee Brett Kavanaugh is he ran up tens of thousands of dollars in credit card debt buying Washington Nationals baseball tickets for himself and friends over the past decade.
What all this debt-fueled spending means, say economists, is we’re feeling pretty confident about our financial standing, now and in the future. We think our jobs are secure, and our incomes are going to rise.
Nonetheless, eight of the largest credit-card lenders report that missed payments and charged-off losses have begun creeping up — seven straight quarters’ worth through the end of 2017, according to Fitch Ratings.
If this is where you are — slipping behind while your credit card debt piles up — read on.
Credit Card Debt Relief Options
Assorted options — none of them without a certain amount of pain, alas — exist for consumers serious about burying their credit card debt.
If you own your home, and if there is substantial equity in it, and if you could refinance and take out some cash to liquidate your high-interest credit card debt, and if that would free up extra money in your budget, and if you were absolutely certain you wouldn’t start charging beyond your means again, maybe a visit with your friendly mortgage lender, or a competitor, would make sense.
But that’s a whole bunch of “ifs.” The pain here: You’re putting your home at risk.
Before you embark on such a radical move, consider scheduling an assessment with a nonprofit credit counseling agency. Their experts are likely to have ways out of your credit card debt hole you never imagined.
For instance: Are your credit card balances ringing up high interest charges? Assuming your FICO score hasn’t gone south already, shop for a credit card that charges zero interest for a year or more, and rolling as much of your debt onto that as you can. Be wary of the new card’s interest rate after the honeymoon period (usually 12-18 months) and now that you’re back in your familiar self-denial mode, attack the balance for all you’re worth.
Another method: The snowball, or “debt dash,” two names for an identical approach, attacking the lowest balances first, no matter what their interest rates.
Yes, it’s counter intuitive. Lots of folks, professionals and lay people alike, stress mowing down the debt with the highest interest rate first. Makes sense, right? Interest never sleeps, and the higher the interest, the higher the financial pain.
Fascinatingly, what makes sense doesn’t necessarily make the best strategy.
According to a 2016 report published by the Journal of Consumer Research, borrowers gain motivation, and debt-relief momentum, by concentrating first on the lowest balance.
Borrowers who knock off the lowest balance first get excited about seeing that zero, and that revs up their progress. They take the money freed up, and slash into the next lowest balance. And so the process snowballs, or becomes a dash. Pick your metaphor.
Just be certain your extra payments go against principal; some lenders will attempt to apply the extra payments as, well, extra payments.
While you’re at it, contact your credit card companies about lowering your interest rates, waiving fees, or both. Competition among lenders for reliable borrowers is fierce. As a result, says a year-old study by CreditCards.com, some 80% of customers who request a break get one — especially if they threaten to stop using their cards, and shift their balances to one of those zero-interest cards mentioned above.
Beware, most of all, debt settlement companies that claim they can eliminate some or all of your unsecured debt. These oftentimes are scammers who are playing chicken with your credit rating.
Better to talk to a nonprofit debt counseling company about a debt management plan that allows you to pay your unsecured debts (read: credit cards, maybe personal loans) in full, but with a reduced interest rate, or with fees waived, or both. Because they know their mutual clients are being coached through difficult times with honorable intentions, credit card companies work hand-in-glove with credit counselors.
How Credit Card Debt Relief Programs Work
Let’s dispense with the riskiest credit card debt-relief program first: the so-called “debt-settlement” companies. These outfits attempt to negotiate a lump-sum payment that they say will be at least 50% less than what you owe.
But getting to zero can be onerous business: The “settlement” company arranges for you to put a set amount of money in an escrow account each month; meanwhile, you might be encouraged to stop making payments to your creditor(s).
The Federal Trade Commission outlines any number of risks to this scheme, not least of which is your credit score will plummet with no guarantee that you’ll ultimately get out from under your original debt … which will grow from nonpayment.
And even if the promised 30%-to-60% percent balance elimination comes to fruition, guess what: You probably will be on the hook to the IRS for taxes on the forgiven debt. In most cases, the agency is directed to regard such debt elimination as ordinary income.
Instead — at the risk of sounding like a broken record (which we can safely say again, now that vinyl is back) — consult with a nonprofit credit counseling company. Your counselor and his/her team of experts will arrange terms with your lenders for paying off your debt; meanwhile, in most cases, they’ll help you into a plan that consolidates all your unsecured debt into a single, manageable monthly payment.
Everybody wins. Especially you, who will be wiser, and perhaps not as sad as you were when your credit card debt had you feeling overwhelmed.
Credit Card Debt-Relief Companies: What to Look for
Make sure, at the top, you’re dealing with a nonprofit organization. If it’s debt consolidation you’re after, your counselor or online source can help free of charge.
You’ll also get help designing a workable budget that takes into account all your monthly income and expenses, with an eye to establishing how much money you have available to target your consolidation.
The top features of the best debt-consolidation companies:
- Nonprofit organization
- Low fees
- Lower interest rates than you’re paying now
- Affordable monthly payments
- You’ll get into a program that zeroes your debt in 3-5 years, sometimes less.
Credit Card Debt Relief Myths Debunked
You know what they say: If it sounds too good to be true, it probably is. That’s especially true with companies that claim they can settle your debt for far less than you owe. As we’ve seen, the FTC is all over this with flashing lights and sirens.
But let’s take a deeper dive.
- Think you can get your credit-card balances cut in half for any reason at any time? Think again. Debt settlement is for borrowers in dire straits, such as a job loss, a divorce, medical problems or some other major life incident. Getting credit card debt waived just because you feel like it isn’t going to happen.
- You have to pay someone to help settle credit card debt, right? Not necessarily. We mentioned some tools above — snowball/debt dash, asking your lender for relief, rolling debt into a single lower-interest loan — that are available to anyone with the slightest bit of resourcefulness.
- Doesn’t getting out from under all these bills mean paying upfront to the debt settlement company, which then is in control of my money? Wrong again. Not since October 2010, when the FTC blocked debt settlement companies that market their services from collecting advance fees.
- Debt settlement won’t harm my credit score, right? You will get dinged and could get dinged almost as badly as if you declare bankruptcy. Asking for a settlement won’t hurt, but getting debt waived will drop your score.
- Maybe you’re heard using a debt-settlement company is cheap. You heard wrong. Most debt-settlement companies charge on a percentage basis, based either on your total debt, or on the amount forgiven. … And then there are those penalties for late payment, added interest and income tax implications, which surely won’t be inexpensive.
- If I don’t settle, or resolve it, my debt stays on my record forever. Actually, no. Collecting a debt has a statute of limitations. Which is why, if you have an ancient debt on which the lender went silent, you should be wary of renewed attempts to reinitiate payment; you might be targeted by a collector who has bought your old, time-barred debt.
- If I’m hopelessly behind, debt settlement or bankruptcy are my only options, right? It depends on your circumstances. Did you lose your job? Call your creditors; they may grant you forbearance — that is, they may reduce or suspend your payments for a while. … Meanwhile, contact a nonprofit credit counseling service to help you get reorganized, and to go to bat on your behalf.
- Well, at least when the negotiations are completed, I’ll be out of debt. Not so fast. Some debts do not qualify for settlement: student loans, taxes owed, child support, alimony. Secured debt — on a house, a car, a boat, or a collateralized personal loan — can’t be easily settled, unless the security is repossessed, or demonstrated to be worthless.
A cautionary tale
Once upon a time I had a colleague, a young fellow just out of college in his first full-time job. We were going to get an after-work drink one evening when, out of the blue, he said, “I love having a credit card. It’s great. I can buy anything I want, and at the end of the month, I just have to send them $25. Is that a great deal, or what?”
I should point out that my colleague had a quirky sense of humor combined with a classic Midwesterner’s modesty with money, so I’m pretty certain he was kidding.
But for too many of us, what he said as, probably, a gentle poke in the ribs is how we live our financial lives. A credit card opens a universe of opportunities. We use them to get stuff, buy gifts, go out on the town, have adventures, and when the bill comes, we don’t look at the balance — heck, we avoid looking at the balance — but instead focus on the minimum payment. How much do we need to send the lender to let the good times keep rolling?
We have to arrest that sort of thinking before it ruins us, and all we’re able to think about is credit card debt relief. Be smart about credit card usage from the start, and your financial joy will be everlasting.
Need help choosing the best debt relief option for you?Get Help Now
- Andriotis, A. (2018, Feb. 14) Americans Can’t Get Enough Consumer Debt. Retrieved from https://www.wsj.com/articles/americans-cant-get-enough-consumer-debt-1518609600
- Brittain, A. (2018, July 11) Kavanaugh piled up credit card debt by purchasing Nationals tickets, White House says. Retrieved from https://www.bostonglobe.com/news/nation/2018/07/11/kavanaugh-piled-credit-card-debt-purchasing-nationals-tickets-white-house-says/EdJiFh7K1uY22FzgPcUTOI/story.html
- Coppola, A. (2015, Sept. 22) Refinancing a Mortgage to Pay Off Credit-Card Debt. Retrieved from https://www.wsj.com/articles/refinancing-a-mortgage-to-pay-off-credit-card-debt-1442923203
- Kornelis, C. (2017, Dec. 10) A Five-Year Plan for a Couple to Eliminate Debt and Save More. Retrieved from https://www.wsj.com/articles/a-five-year-plan-for-a-couple-to-eliminate-debt-and-save-more-1512961320
- Singletary, M. (2018, July 24) Ready to pay off your credit cards? Try the ‘Debt Dash’ method. Retrieved from https://www.washingtonpost.com/business/2018/07/24/what-is-best-way-pay-off-debt/?utm_term=.c91ea5c2d72a
- Andriotis, A. (2017, March 27) Now Negotiable: Credit-Card Annual Fees. Retrieved from https://www.wsj.com/articles/now-negotiable-credit-card-annual-fees-1490587260
- O’Shea, B. (2017, Dec. 21) Debt Relief: Understand Your Options and Consequences. Retrieved from https://www.nerdwallet.com/blog/finance/find-debt-relief/
- NA (NA) Settling Credit Card Debt. Retrieved from https://www.consumer.ftc.gov/articles/0145-settling-credit-card-debt
- Herigstad, S. and Haywood Queen, K. (NA) 8 myths about settling credit card debt. Retrieved from https://www.creditcards.com/credit-card-news/help/8-myths-settling-credit-card-debt-6000.php
- Johnson, H. (2015, May 11) How to Create a Budget With a Credit Card. Retrieved from http://www.thesimpledollar.com/how-to-create-a-budget-with-a-credit-card/
- NA, ND. Credit Card Dispute: The Rules, The Process & your Rights. Retrieved from http://creditcardforum.com/blog/credit-card-dispute/
- Fulmer, L. (2015, January) American Express, Discover, MasterCard, and Visa Purchase Volume Up 8.9% in 2014. Retrieved from http://www.businesswire.com/news/home/20150219006254/en/American-Express-Discover-MasterCard-Visa-Purchase-Volume
- Bankrate. (n.d.). Credit Card calculator. Retrieved 2013, January 29 from http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx
- Federal Trade Commission (2012, November). Coping with Debt. Retrieved from http://www.consumer.ftc.gov/articles/0150-coping-debt
- Federal Trade Commission. (2012, August). Using a Credit Card. Retrieved from http://www.consumer.ftc.gov/articles/0205-using-credit-card