Need Help With Credit Card Debt? Here’s what the experts have to say
Feeling guilty for swiping your credit card? You’re not alone: ââNearly 40% of Americans carried a balance on active credit cards in the last quarter of 2020, according to the American Bankers Association.
Americans had more than $ 761 billion in credit card debt as of early July, and even that number is down from the pre-pandemic high of nearly $ 860 billion, according to the St. Louis Fed.
âEverything you do financially is fixable,â said Shannon McLay, Founder and CEO of Financial Gym. âWhatever scares you, whatever the numbers, whatever the case, everything is fixable. It’s just a matter of how many repairs you have to do.
Debt can be financially and emotionally difficult to manage. Here’s how to start digging yourself.
1. Know exactly what you need
Before you can make a plan, you need to know what you need. Look at each of your debts, write down how much owed – the interest rate, minimum payment, fees, how long you have to pay it off – and keep it all in one place. McLay says most of his clients don’t know this information and it’s hard to plan without these crucial statistics.
2. Prioritize your debts and establish a payment plan
When you’re dealing with more than one source, the thought of paying off your debt can seem overwhelming. There are two common methods of eliminating your debt: the avalanche and the snowball. The Avalanche Method pays off your debts from highest to lowest interest rates. This way you save the most money in interest.
If you’re struggling to stay motivated, try the snowball method, where debts are paid off from the smallest to the largest amount owed. It can help overcome the mental barrier of feeling like you might never get out of the hole.
Once you’ve figured out how to handle your payments, make sure you make at least the minimum payment each month. âAs long as you make minimum monthly payments on everything, your credit score will actually be good,â McLay said. But remember, the longer you wait, the interest will accrue.
3. Negotiate your interest rates
Feeling depressed about the amount you owe in interest? It’s not necessarily a fixed rate, according to NBC News senior correspondent Stephanie Ruhle. âJust because a lower interest rate isn’t advertised doesn’t mean it’s not available,â Ruhle said. “What’s the worst thing that can happen?” They say no and you are in the same place you were when you made the call.
That little phone number on the back of your credit card is there for a reason. Interest income is typically compounded daily, so there’s no time to waste asking for a break.
4. If you can’t pay, tell your lenders
No one likes to be a ghost, including your credit card company. If you can’t even make your minimum payments on time, McLay recommends picking up the phone and calling your lenders.
“Lenders are very lenient with their borrowers because of the times we live in, so they really want you to register, they want to know you’re alive and they want to know what you can afford to pay them. ” she said.
If you’re tempted to go through a third party to help you settle your debt, be sure to call your lenders first. âYou have a much better chance of contacting lenders directly than going through debt consolidation companies,â McLay advised. âYou better try to do it yourself. “
5. Be gentle with yourself
Millions of Americans are struggling with credit card debt, and Ruhle advised keeping his eyes on the debt-free price. âThe biggest problem is avoiding debt and hiding. Your debt doesn’t go away while you avoid it, it just gets worse, âshe said. âNever lose hope. “
There’s no reason to blame yourself, especially if you can spend the effort elsewhere. âThat kind of emotional energy of feeling bad about it is just going to keep you from dealing with (the debt) in a positive way,â McLay said.