Sometimes credit card debt can sneak up on you, thanks to a thousand little purchases you needed to make at a thousand different times. Sometimes your debt is large enough that there’s no chance of avoiding it, such as a big repair bill or hospital bill you need to pay off but can’t afford to pay it all at once. Either way, card debt can quickly become a serious problem if you aren’t able to pay off your balance every month. The interest rates usually aren’t kind, so it’s important to know how to handle these debts and improve your situation.
- Debt Consolidation
Image via Flickr by ThomasKohler
Debt consolidation is easier than you might expect. To put it simply, one company will buy all of your outstanding debts from your credit card companies, your bank, and other institutions you owe money to. You can then pay this debt by sending one monthly payment to the new debt holder instead of a dozen payments to a dozen companies. A consolidated debt might take longer to pay off, but it also gives you a much smaller monthly payment, with only one company needing to be paid.
- Pay More on Your Credit Cards
You can reduce your debt faster and substantially reduce the total interest you’ll pay if you make larger payments on your credit cards. You should always pay more than the minimum payment anyway, but the more you pay each month, the closer you’ll be to getting rid of that debt. You may have to move money away from other areas, such as emergency savings or your hobbies, but you’ll be better off in the long run.
- Consider Debt Settlement
Debt settlement can bring down your debt owed to a fraction of the original amount. However, not everyone qualifies for this kind of debt relief. You need to show that you’ve been missing payments and that there’s no real way for you to make regular payments based on your income and net worth. You also can’t settle certain kinds of loans, but fortunately, a credit card debt is a type you can settle.
- Destroy Your Credit Cards
Sometimes you get into debt because you have to. Other times you take on debt because you can’t help yourself. If you’re part of the latter group, the last thing you’ll want is a way to get into more debt just as soon as you finish paying off the last one. If you can’t trust yourself with a credit line, then don’t. Cut up your cards, cancel your accounts, and stick to paying from your bank account using a debit card. You may miss the rewards or the available credit, but it’s worth the loss if you’re able to stay out of credit card debt.
It’s always a bad idea to keep an outstanding debt on a credit card. Move it, pay it back, settle it, or avoid it. Just make sure you don’t let it sit and gather interest.
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