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If you’re feeling overwhelmed by credit card debt, know that you’re not alone. Credit card debt has reached a record high of over $1 trillion in the United States. The average person now owes $6,568 in credit card debt according to the Federal Reserve Bank of New York. This is up from $5,963 in 2022. That is a lot of debt and growing as people continue to use credit cards just to make ends meet.
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It can be tempting to avoid thinking about your credit card debt, and just brushing it under the rug. But the sooner you work to pay it off, the easier and faster it will be. Believe it or not, you can successfully tackle your debt in only four steps.
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Interested? This guide will take you through four actionable steps to help you move toward a debt-free future.
1. Choose a payment strategy or two
If you have multiple credit cards, choosing a payment strategy can help you manage and reduce your debt more efficiently. The most popular ones are the avalanche method and the snowball method. With the avalanche method, you pay off the credit card with the highest interest rate first, while making minimum payments on your other cards. This will save you money on interest charges and is the most cost effective but can take a while. If you’d rather have the motivation of quick wins, go with the snowball method. Here you pay off the credit card with the smallest debt first while continuing to make minimum payments on all other cards. There’s no one right answer; choose a strategy that works best for your situation.
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2. Consider debt consolidation
Debt consolidation can be useful since it lets you combine multiple credit card balances into a single loan ideally with a lower interest rate. Try to get a balance transfer credit card with an introductory 0% APR. This will give you a break from interest charges while you pay off your debt. Just be sure to pay off all your debt before the introductory 0% APR period ends. A second choice, and easier if you have bad credit, is to take out a personal loan. Loans tend to have lower interest rates than credit cards. So while you will still be paying interest, it’s highly likely you’ll be paying substantially less. Remember that while consolidation can simplify payments and potentially reduce interest costs, it’s vital to continue budgeting and avoid accruing new debt.
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3. Call your creditors
It might sound intimidating, but it can be beneficial to reach out to your creditors and explain your situation. Many creditors are willing to work with people who genuinely want to pay off their debts. You may be able to negotiate a payment plan, get lower interest rates, or enter a hardship program. This is especially true if you’ve been a loyal customer with a good track record. Be polite, explain why you’ve had difficulty paying, and they may just be able to help you get a handle on your debt.
4. Find debt relief
If you’re really struggling to get your debt under control don’t be afraid to ask for professional help. Debt relief organizations can assist. You can find credit counseling, help setting up a debt management plan, and professionals who can help negotiate with your creditors for reduced interest rates, waived fees, or debt settlements. As a last resort, you can file for bankruptcy, which will eliminate unsecured debts, like credit card debt. Be wary of this option as it will have a severe impact on your credit and should only be considered after consulting with a legal professional.
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Final Thoughts
Credit card debt is a burden to carry, but it’s important to realize that it’s not the end of the world. A lot of people are struggling with inflation and the aftermath of the pandemic. Salaries haven’t kept on with the rising cost of living and many people don’t have much savings. You don’t have to get out of debt now. Don’t put that pressure on yourself. The key is to make a plan and start paying off your credit cards diligently. Follow our four steps, get started on your debt-free journey, and the burden will lessen faster than you think.
Want more tips on what to do and what not to do as you pay off debt? Check out 8 Mistakes to Avoid When Paying Off Debt.
