Surrounded by unpaid credit card balances? You might be feeling overwhelmed by your debt and unsure of how to start paying it off.
Fortunately, we’ve assembled 9 credit card strategies you can use to get out of debt. They range from the lightweight (create a budget), to the medium (bad credit debt consolidation loans), to the serious (declare bankruptcy).
Ways to get out of credit card debt
1. Create a budget
Creating and following a budget can help you avoid discretionary spending and focus on essential expenses. To create a budget, compare your post-tax monthly income against your monthly expenses. If you’re spending more than you’re making, it’s time to make some cuts. For example, are 6 streaming services really necessary?
2. Pay more than the minimum
Paying more than the minimum on your card each month can help you pay your credit card balance off faster and save money on interest.
3. Find a side hustle
The more money you make, the more you’ll be able to put toward your bills. Finding a side hustle, such as driving Uber or selling gently used items online, can help you have extra cash for your debt.
4. Choose a repayment strategy
Repayment strategies, like the debt snowball or debt avalanche methods, can give you a predetermined payoff plan to follow.
• Debt snowball: With the debt snowball method, you’ll make all your minimum payments, but you’ll put extra money toward your debt with the smallest amount. Once you’ve paid that off, you’ll put all your extra cash toward the next smallest debt. The debt snowball can be a good fit for people who need an extra dose of motivation to become debt-free.
• Debt avalanche: With the debt avalanche method, you’ll continue to make minimum payments, but your extra cash will instead go toward the debt with the highest interest rate. Once you’ve paid that off, you’ll pay off the debt with the second-highest interest rate. The debt avalanche method can help you save more overall.
5. Consider debt consolidation
Consolidating your debt can help simplify your monthly payments, lower your interest rate, and/or get you out of debt faster. There are two ways to do it:
• 0% balance transfer card: If you can qualify for a credit card with a promotional 0% APR balance transfer period, you can transfer your debt to that account and focus on making one monthly payment. This can save you money and simplify your bill paying. Just make sure you can pay off your balance by the time the promo period ends. Otherwise, you could be stuck paying a high APR for the remaining balance.
• Personal loan: You can also take out a debt consolidation loan. Debt consolidation loans typically have lower interest rates than credit cards, as long as your credit score is good or excellent. If you can’t secure a favorable interest rate, you might want to consider other options.
6. Talk to creditors
You can reach out to your creditors and explain your financial situation. They might be willing to negotiate with you or offer a hardship program. Either may lower your interest rates or waive some fees.
7. Debt management plan
A debt management plan is when you work with a nonprofit credit counseling agency. You’ll pay your counselor a fixed monthly rate, and they’ll negotiate new terms with your creditors and help consolidate your debt.
8. Debt settlement
With debt settlement, you work with a third-party company to negotiate settlements with your debtors. You’ll typically pay the debt settlement company a lump-sum in exchange for a portion of your debt being forgiven. However, debt settlement has its risks. The company can charge you large fees, your credit score could drop, the debt settlement process can take years, and some lenders may not agree to settle.
9. Bankruptcy
Bankruptcy should be seen as a last resort. It can tank your credit score and it will stay on your credit report for 7 to 10 years. Note that some debts, including tax debt and student loans, can’t be resolved with bankruptcy.
Hopefully, one of these credit card repayment methods fits your lifestyle and financial needs. The most important thing is to pick a method that you know you’ll be able to stick with. Stay focused and take it one day at a time—we believe in you.
By Stefanie Gordon
Stefanie Gordon is a content strategist with over a decade of professional writing experience. She is a former financial journalist who has spent the last several years working in digital marketing. She specializes in content strategy and creation for large and small businesses in finance and technology.