To become debt-free, you must know how to successfully deal with credit card debt. If you’re like the millions of people purchasing with plastic, unpaid balances are in your way.
They’ve allocated most of their spending power in repayments, yet they’re nowhere closer to completion.
Here are some ways you can finally pay off credit card debt and improve your finances.
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What Does It Mean To Be In Credit Card Debt?
Being in credit card debt means being liable to repaying unpaid balances made using your piece of plastic. Financial institutions like banks and credit unions issue these cards along with a detailed repayment plan.
They usually require monthly payments with corresponding interest rates. If you fail to comply, you’ll be penalized with credit score deduction and late fees.
Unpaid credit card balances are classified as unsecured debt. This is a type of debt that requires no collateral, so failing to pay off credit card debt won’t risk your assets.
If you fail to repay secured debts, the lender may just take your possessions as compensation. This doesn’t mean you can be gungho with racking up them up though, as your bank may file a lawsuit instead.
While some people may get sued for card debts, the regular joe struggles with repayment.
Some folks use most of their money to pay off credit card debt, so they aren’t able to set some aside. Others can’t even meet minimum payments, so the balances just keep growing in interest.
If you’re one of the people in card debt, you probably need help getting out.
How Much Credit Card Debt Does The Average Person Have?
According to recent card debt and population numbers, the average US citizen owes around $1,344.
This was derived from cumulative card balances from 2019 and the population total from January 2020. Several months have passed since, so that estimate likely has increased by now.
In addition, the COVID-19 pandemic has caused an economic downturn, so Americans might find it harder to pay off credit card debts now.
How to Pay Off Credit Card Debt
If you owe too much on your credit card accounts, you understand how unpaid balances disrupt your personal finances.
You probably wanted to use your extra money for an emergency fund or a relaxing getaway.
Unfortunately, you allocate them for repayments, but you’re probably nowhere close to completion. In addition, the debts are worsening your credit report, hobbling your finances further.
Thankfully, there are numerous ways you can pay off your debts for good. You could combine your debts to facilitate debt payoff.
You may also request assistance to minimize your unpaid credit card balances. Moreover, you could talk to a credit counselor for guidance in personal finance.
Finally, you may follow time-tested methods in paying off your debts yourself.
Credit Card Debt Consolidation
One of the reasons why you find it hard to pay off credit card debts might be their sheer number.
You may owe massive amounts in various bank accounts, each with their repayment terms and conditions. It’s difficult to keep up with several payment deadlines, monthly dues, and interest rates.
Luckily, your card issuer may help by offering debt consolidation.
You could borrow a lump sum that pays off all your unpaid balances.
In effect, you’ll replace them all with one debt that may have a lower interest rate. By having just one balance, you might find it easier to pay off debts.
Take note that consolidation may only be done on unsecured debts like those from student loans. The method of debt consolidation we’ve discussed is performed using personal loans.
Moreover, it will depend heavily on your credit health. Banks and credit unions analyze credit reports in order to determine how much borrowers may receive for debt consolidation.
You may not be allowed consolidation to pay off credit card debts easier if your credit score is too low. On the other hand, you may combine those unpaid balances using a balance transfer credit card.
Instead of borrowing a lump sum, your unpaid balances will be consolidated into this card. Even better, it has an introductory period that offers 0% APR.
This allows you to attack the principal directly, so you might just complete repayment faster!
How to Lower Credit Card Debt
If you have severe financial problems, you might need more help to pay off your credit cards.
Some people simply can’t meed minimum payments, so their debts keep piling up. If they could only reduce their debts, then they might be able to turn their finances around.
For severe financial circumstances, debt settlement might minimize their debts and help them avoid bankruptcy.
They may ask a debt relief agency in order to negotiate a settlement on their behalf.
In most settlement terms, they usually must not pay off credit card debts and transfer funds into an escrow account instead.
Then, the company will speak with your lenders while the client accrues escrow funds.
If debt settlement succeeds, the escrow money will be used to repay the reduced debt.
How Counseling May Help With Credit Card Debt
Personal finance problems surprisingly go beyond just not being able to pay off credit card debt.
For example, some folks cannot stave off the allure of discount promos. They swipe plastic for unnecessary stuff like there’s no tomorrow, so they’re buried in debt today.
Fortunately, a credit counselor may teach how you can repay your credit card with proper money management.
You may visit a credit counseling agency for a session with their representative.
Their counselor will analyze your financial history, and discuss how you may pay off your credit card debts.
Moreover, you may attend their seminars and use their print resources for further guidance. Even better, they may lower your monthly payments with their debt management plans.
How You Can Eliminate Credit Card Debts By Yourself
Did you know you can actually pay off credit card debts by yourself? You might not be gaining progress because of your incorrect approach to repayment.
Fortunately, you may follow the tried-and-tested methods called debt snowball and debt avalanche. These involve paying debts individually according to ascending or descending amounts.
You may pay the lowest amount first using the debt snowball method. Completing the lower payments one-by-one may motivate you to continue debt repayment.
In contrast, you may start with the largest debt with debt avalanche. If you have enough discipline, this method may help you pay off credit card debts faster than the snowball way.
How To Answer A Civil Summons For Credit Card Debt
If you delay payments for your credit card issuers, you might face grave consequences.
Owe a large enough amount of card debt for too long, and they may file a lawsuit against you. If you get sued by your credit card company, you should verify their reasons for doing so.
You might not actually owe anything due to some error. If they call or file lawsuits because you can’t pay off credit card debts, respond immediately.
Communicate about the issue in order to prevent exacerbating your situation.
More importantly, seek legal counsel for assistance. An attorney will help you navigate such a complex issue properly.
Learn More About Credit Card Debt
What is the best way to pay off credit card debt?
The most suitable method for paying off unpaid card balances will depend on your financial situation. Check the available options yourself to find out which one works the best.
Is it bad to have credit card debt?
No, credit card debt is not an absolute negative. Those cards can help you cover huge expenses without carrying physical money. It may even help you deal with emergency expenditures immediately. It depends on you whether your plastic swiper harms or helps your finances.
How often do credit card companies sue for non-payment?
Card issuers don’t usually sue for non-payment since most unpaid card balances are settled without legal action. Additionally, lawsuits cost both borrowers and card issuers a lot of money and time. You would have to owe so much for too long in order to justify that expense.
What happens to credit card debt when you die?
If a credit card holder dies, the issuer will seize their assets as repayment. In contrast, a friend or relative will foot the remaining balance of the deceased cardholder if they’re cosigned.