Credit Card Debt –Overwhelming But There Is Hope

Credit Card Debt – Relief Solutions

There are a number of reasons why people rack up credit card debt and quite often the guilt people associate with their credit card debt leads them to bury their head in the sand.

Sadly, in almost all cases – this behavior that is usually exhibited by large birds is not going to solve spiraling debt problems – in fact, it will usually exacerbate the situation and lead to even more financial problems in the long term.

There are very few situations where consumers cannot help themselves so let’s look at some insights to offer light for those people who might feel like they are in their darkest moments.

For others, we’ll examine some top tips on how to reduce credit card debt and find a quicker route to a debt free life.

A Very Real Problem

According to a recent conducted studyignoring-debt the average credit card debt for an American household in 2016 is $5,700 and the total US consumer debt stands at a whopping $3.4 trillion.

Over two thirds of US households have some form of debt associated with a credit card. Perhaps one of the most startling (but unsurprising) statistics is that households with the least net worth have the highest levels of credit card debt, an average figure standing at $10,307.

These figures show the reality of a nation that has grown up in a ‘buy it now culture’ and although there should certainly be no shame in having credit card debt, there are solutions to most all financial predicaments.

Debt from credit cards is not restricted to those on low incomes.  On average, women have 22% less debt than men on credit cards, though spending habit reports that women are more likely to spend on credit cards but on lower priced items.

Solutions To Credit Card Debt 

Whether you are looking for credit card consolidation, moving to a prepaid credit card, secured credit card or another form of credit card debt relief, we’ll examine some of the best options here.

Credit Card Consolidation Loan 

If your debt is spread over a number of credit cards (that could potentially be high in interest rates) then the first option to assess is to consolidate all of your debts in to one easier to manage monthly sum.

In most cases, this will be a personal loan (that can be secured or unsecured) and will often reduce the amount you pay each month. A recent report  stated that borrowers who used one of their personal loans as part of credit card consolidation, lowered their payments by an average of 32%.

Nevertheless…

You should choose a convenient date to schedule your payments.  For instance, if you get paid monthly it makes sense to have this payment take place a day or two after you get paid.   Set them up for automatic payments.  This will avoid nasty credit card charges when you simply overlook or forget about it.

But there’s a catch.

The disadvantages of a personal loan to consolidate your credit card debts is that it requires an enormous amount of self discipline to ensure you don’t wind up in the same situation.

By the way…

Make sure you consolidate ‘all’ your credit card debts through a personal loan if possible.  Then close every account.  If you get emails or snail mail with offers, throw them away quickly,  you must break the habit of spending on credit. 

Secured Credit Cards 

If you are maxed out on your personal lending allowances then you might find that your credit score has taken a hit and a personal loan for consolidation is not an option.

While paying off credit with another credit card is not the most viable solution it is one that can work if you don’t want to take on government assisted debt relief programs.

The advantage of taking out a secured credit card is that it can help rebuild your credit score. This means that it could be seen as a stepping stone towards consolidating with a personal loan in the future.

The added complication with a secured credit card is that you will have to secure it with something of value such as a deposit. This may be an unattractive option for some people but it means you can still take responsibility as you are the one in control of your finances.

Debt Relief 

Sometimes it’s wise to find help from finance professionals. There are a number of debt relief options designed to help people who are finding it difficult to meet their monthly credit payments but want to find a solution.

Most payments that remain unpaid for over 6 months will be subject to creditor lawsuits.  This in itself brings on more stress and in most cases, expenses for legal counsel.

Often a negotiation between the two parties can be struck but may require the help of a professional. 

Debt Management Program 

A Debt Management Program (DMP) can be entered in to if you are finding it difficult to budget month to month. The aim of most DMPs is to reduce monthly payments by negotiating a reduced interest rate or a temporary reduced interest rate.

Many creditors will approve this as they are more likely to receive some of the money back that they have lent out and it of course benefits the debtor as they can make their payments more affordable.

As it turns out…

In the long term you should see an improvement in your credit score, although this certainly could be adversely affected in the short term, depending on where you are in paying your creditors.

Most debt management programs come with either a fixed or monthly fee that might put some people off, but the savings negotiated will offset these fees in the long run.

Credit Counseling 

An option that many people overlook is credit counseling.  Although it may not be a complete solution in itself, it is often the first step to finding a workable credit-counselingsolution.

A big advantage of credit counseling is that it’s often free and offered by non-profit organizations.   Some do charge fees so always do your homework before fully engaging.

Most are certified counselors and you can expect to find unparalleled financial and budgeting advice if you find a reputable counselor.

Bankruptcy

The most dreaded word:  Bankruptcy.  While this is the most dramatic of situations in terms of debt recovery,  it is also one that is designed to offer support to the debtor.

Bankruptcy may essentially cancel all of your debts and wipe the slate clean, the downside is your assets will be in jeopardy, and it’s often expensive.

Always seek professional help if you find yourself feeling there is no other way than filing for bankruptcy.  It may be the only way, but overwhelming debt clouds our focus, and sometimes our hopes.  Professionals can help clear the way, and offer much needed hope.

Bottom Line?

No matter what level of credit card debt you have currently,  it’s imperative to take action and reduce your credit card debt as soon as possible.

Being willing to talk about debt is the best thing you can do as most people you talk to will have some level of expertise as more than a third of Americans have some form of credit card debt.

It is also important to realize that credit card debt is not always a bad thing, but the warning sign should is the level of debt you have.  Remember, if you are taking out more debt to cover existing debt but your monthly payments are higher, proceed with caution.

Any form of consolidation should ultimately be to pay less in the long term – sometimes that might mean paying more in terms of monthly payments, although often it might mean paying less – but in the long term your debt will vanish.

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