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How to get rid of credit card debt

Bankrate logo Bankrate 8/18/2020 Nicole Dieker
a person sitting at a table: WAYHOME studio/Shutterstock.com © WAYHOME studio/Shutterstock.com WAYHOME studio/Shutterstock.com

Many Americans struggle with credit card debt. Average credit card balances totaled $5,338 per person as of May 2020, according to an Experian consumer debt study-and the recent economic downturn has made it even more difficult for people to manage and pay off their debts.

If you’re overwhelmed by credit card debt, you’re likely searching for a solution. You might even be wondering whether you can go to jail for credit card debt. (Don't worry-if a debt collector ever threatens you with jail time, they're the ones who are breaking the law.) Getting rid of credit card debt might take time, but it's an achievable goal-and there are many different tips and strategies you can use to reduce your debt, lower your interest rates and begin your journey towards a debt-free life.

a man sitting at a table using a laptop: Young male college student doing paperwork while listening to music © WAYHOME studio/Shutterstock.com Young male college student doing paperwork while listening to music

If you need credit card debt help, you've come to the right place. Here are some of the best ways to get out of credit card debt, negotiate with your creditors and develop a plan to help you avoid credit card debt in the future.

Tips for getting rid of credit card debt

Credit card debt can feel overwhelming, but don't worry-you have options. Here are five ways you can get rid of credit card debts and get your financial life back on track:

  1. Find a payment strategy (or two)
  2. Consider debt consolidation
  3. Negotiate with your creditors
  4. Seek help if your debt is overwhelming
  5. Try a balance transfer credit card

Find a payment strategy (or two)

There are many different ways of getting rid of credit card debt-so if you're looking for the best solution, focus on the debt payment strategy that is the best for you.

The debt snowball method, for example, tackles your smallest debt first. Continue making minimum monthly payments on your other debts, but throw all your extra money on your smallest debt-and when that debt is gone, start throwing your money at your next smallest debt and so on. As each debt disappears, you'll have more money to put toward your remaining debts. This is why it's called a "debt snowball."

The debt avalanche method, on the other hand, tackles your highest interest debt first. Similar to the debt snowball, you make minimum payments on all your other debts, but with this strategy you throw your extra money at the debt with the highest interest rate. Once that debt is paid off, repeat the process with the debt that has the next highest interest rate, and so on.

If you're not sure whether to start with the debt snowball strategy, the debt avalanche strategy or any of the other debt payment strategies out there, try using a debt management calculator. If you want to know how long it will take to pay off $10,000 in credit card debt, for example, a debt calculator will give you the answer. You can also use debt calculators to learn which debt repayment method might be the easiest, and which one might save you the most money over time.

Consider debt consolidation

One debt payment strategy that many people don't consider is debt consolidation. If you're drowning in debt, consolidating your debts into a single monthly payment can serve as a life raft. Depending on how you consolidate your debts, you might be able to lower your monthly payments or reduce the total amount of interest you pay on your debts-and one consolidated monthly payment is often easier to manage than multiple debt payments with different interest rates, minimum payment amounts and due dates.

Negotiate with your creditors

If you are experiencing unusual financial hardship, you might be able to negotiate with your creditors. Coping with debt when you are unemployed, for example, is exceptionally hard, but your creditors are familiar with these kinds of difficult situations and might be able to make your life a little bit easier.

Many banks and lenders offer hardship programs designed to assist people who are struggling with their debts. Talk to your creditors and see if you can negotiate a lower monthly payment, a lower interest rate or a forbearance program that will let you temporarily suspend your debt payments. Your creditors may also be able to recommend credit counseling firms or other resources that can help you learn how to manage your debt during tough times.

Seek help if your debt is overwhelming

If your debt has gotten to the point where it is overwhelming every other aspect of your life, it's time to seek help. There are many reputable credit counseling services out there, so see if you can find a nonprofit credit counseling organization that can help you create a debt management plan.

Although it is very difficult to get out of debt without paying, it is possible to reduce the total amount you owe. You might want to consider working with a debt settlement attorney who will negotiate with creditors and collections agencies to reduce and consolidate your debts. The debt settlement process generally has a negative effect on your credit score-after all, you're admitting that you can't pay off your debts-so treat it as a last resort.

Try a balance transfer credit card

If monthly interest charges are the only obstacle preventing you from paying off your credit card debt, it's time to apply for a balance transfer credit card. The balance transfer process allows you to consolidate your existing credit card debts onto a single card, often with an introductory zero percent APR period that allows you to pay off your balances without paying interest. The best balance transfer credit cards offer intro APR periods that last between 15 and 18 months.

The balance transfer process is one of the easiest ways to get rid of credit card debts-and if you manage your balance transfer card responsibly, it can even help you boost your credit score.

How to avoid debt in the first place

Getting out of debt is hard, so how can you avoid getting into debt in the first place? Here are three tips to help you stay on track and keep your credit card balances from getting out of control.

Pay your bills on time

Making on-time payments every month can help you avoid the high cost of credit card debt. If you pay off your statement balance in full before your grace period ends, you won't have to pay interest on your purchases. Even if you can't pay your balance in full every month, making on-time payments on your credit cards is an excellent way to build your credit score while avoiding the late payment fees and interest rate hikes that can turn your debt from manageable to overwhelming.

Spend within your means

The best way to stay out of credit card debt is to spend within your means. Avoid making credit card purchases that you know you can't pay off in full at the end of the month, and try not to let your expenses exceed your income. If you need to carry a revolving balance, make a plan to get your balance paid off as quickly as possible. The longer you let that balance sit on your credit card, the bigger it will grow.

Build an emergency fund

Many of us know how to budget for life's everyday expenses-it's the unexpected expenses that throw us for a loop. Try setting aside a little money every month and building an emergency fund. That way, you won't have to go into debt to cover an expense you weren't prepared for. Even an extra $500 can make the difference between paying a surprise bill and charging a debt that might be difficult to pay off.

Bottom line

The best debt repayment strategy is the one that's right for you. Some may use the debt snowball method to organize and pay off their debts. Others may benefit from a balance transfer credit card. If your debt is overwhelming, you might want to consider hardship programs, credit counseling or other types of credit card debt help.

Want more information about how to reduce credit card debt? Visit Bankrate's credit card debt resource hub. You'll learn about payoff strategies, debt relief options and other tools to help you manage your debt and work toward a debt-free life.

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