Last updated on March 8th, 2023
Credit card debt is something that continues to haunt millions of Americas. Studies have shown that the coronavirus pandemic has hit American wallets exceptionally hard, with many turning to credit cards to help manage everyday expenses. If you are struggling with credit card debt, there are ways to help ease the stress these financial burdens can have on your life. Here are four basic ways to cut credit card debt.
Four Ways to Cut Credit Card Debt Fast
Here are four of the most common (and practical) ways to quickly reduce and eliminate credit card debt.
Debt Consolidation
One of the best ways to tackle credit card debt is by consolidating multiple large payments into one, easier-to-manege, smaller payment every month. There are several ways to accomplish this:
Get a Balance Transfer Credit Card
Balance transfer credit cards are a great way to refinance existing debt and pay it down at a lower rate. Most balance transfer credit cards come with a 0% introductory APR period on balance transfers. This promotional period lets new cardholders transfer their debt and pay off much – if not all – with no additional interest payments.
Upgrade Card with Cash Rewards is one such option to consider. The Upgrade Card works by extending a credit line of up to $20,000. The card works both as a Visa credit card and a type of personal loan. Cardholders can use their Upgrade account to transfer their credit line to existing accounts, paying them off to create one balance.
Personal Loans
Personal loans are another popular way to pay down credit card debt. Sometimes known as a debt consolidation loan, personal loans typically offer lower interest rates than credit cards and provide a streamlined way to pay off multiple cards and consolidate that debt into one, easy-to-manage monthly payment. Personal loans come from various lenders, including popular options like Upgrade, Smarter Loans, OppLoans, and Even Financial.
Before opening a personal loan, however, one thing to keep in mind is that these loans come with various fees not found with credit cards – including (but not limited to) loan origination fees.
Use a Debt Management and Repayment Strategy
One of the most popular ways to handle credit card debt is by adopting a repayment strategy. Paying off any debt requires an approach, as, without a plan, interest can multiply – leading to even bigger headaches. Just how much interest can you expect to pay over the life of your credit card debt? Our helpful credit card debt repayment calculator provides insights such as total debt to pay, principal vs. interest, monthly payment estimates, and more:
Two of the most popular debt repayment strategies are the “debt snowball” and “debt avalanche” methods. These methods are similar in that an individual makes consistent minimum payments on all their outstanding balances except for one, which will focus on debt. The difference lies in the order in which the obligations are tackled and whether a person wants to focus on balance or interest rate.
Debt Snowball
The debt snowball method focuses on paying your debt from the smallest balance to the highest, regardless of the interest rate. The main appeal of the snowball method is that you will see progress quickly. Being able to cross off pesky smaller debt amounts one by one can work wonders for your motivation.
The snowball method gets its name from how a small snowball quickly becomes a boulder as it rolls downhill. As you tackle smaller debts, your debt will shrink quicker and quicker.
Debt Avalanche
The debt avalanche method focuses on paying your debt from the largest interest rate to the smallest, regardless of the balance. By targeting the largest interest rate first and putting extra money towards its monthly payment, you are paying less overall interest throughout the life of that debt.
The debt avalanche method tackles the most significant debts, eliminating the biggest headaches first and reducing the need to pay more interest over the life of the debt. The avalanche method is often preferable to the snowball method as it is faster.
Not sure which repayment method is right for you? Use our handy credit card repayment calculator to estimate your monthly payments:
Related Article: Paying Off Debt – Debt Avalanche vs. Debt Snowball
Contact Creditors and Create a Payment Plan
Working with your creditors is a great way to take the first step to tackle credit card debt. Because credit card debt is a type of unsecured debt, creditors are usually more than happy to work with you to help ensure they receive the due money.
Forbearance
Forbearance is the financial hardship assistance provided by a lender. When a borrower cannot make their regular payments, the bank (or card issuer) may offer temporary assistance to let them regroup financially. Asking an issuer for forbearance may sound stressful, but it does not have to be.
The good news about credit card forbearance is that it will not directly impact your credit score. While in forbearance, your credit score will not experience any adverse effects, provided you keep up with the minimum obligations your card issuer requires. Keep in mind, however, that forbearance does not mean interest stops – only that your monthly minimums will decrease for the length of the terms.
Related Article: Does Credit Card Forbearance Hurt Your Credit Score?
Bankruptcy
Bankruptcy is never advisable for the huge variety of negative impacts it can have on your credit score, future loan prospects, and more. That said, sometimes your only recourse for escaping personal debt is bankruptcy.
Chapter 13 bankruptcy is one form of bankruptcy protection that can help you restructure personal debts over five years, without the serious, negative impacts of Chapter 7 bankruptcy protection. Chapter 7, while effective in eliminating unsecured credit card debt, will have severe consequences for your future credit health – potentially keeping you from getting loans in the future.
Related Article: Refinancing Debt: Everything You Need to Know
