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How to Get Out of Credit Card Debt in Four Steps
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How to Pay Off Credit Card In 4 Steps
Depending on the amount you could try a DIY method like debt snowballs or consolidation or even look into debt relief.
Written by Sean Pyles Senior Writer | Personal finances, credit, and personal finance Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet’s “Smart Money” podcast. The show “Smart Money,” Sean talks with Nerds from the NerdWallet Content team to answer listeners’ personal finance questions. With a focus on thoughtful and actionable money advice, Sean provides real-world guidance to help people improve their financial lives. In addition to answering listeners’ money questions on “Smart Money” Sean also interviews guests who are not part of NerdWallet and produces special segments on topics such as the racial gap in wealth and how to begin investing and the history for student loans.
Before Sean took over podcasting at NerdWallet, he covered topics that dealt with consumer debt. His writing has been featured throughout the media including USA Today, The New York Times as well as other publications. When Sean isn’t writing about personal finance, Sean can be found working in his garden, going on runs and taking his dog for long walks. He lives at Ocean Shores, Washington.
as well as Tiffany Curtis Lead Writer | Health and wellness Tiffany Lashai Curtis is a head writer for the core Personal Finance team within NerdWallet. She was previously the health writer at Livestrong.com and freelancer for various publications such Refinery29, Business Insider and MTV News, where she focused on the issues that affect communities with marginalized populations. As a wellness facilitator, she has led conversations for groups like Planned Parenthood and Harvard University. She is located in Philadelphia.
January 25, 2023
Editor: Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, debt and money management Kathy Hinson leads the core personal finance team at NerdWallet. In the past, she worked for 18 years with The Oregonian in Portland in positions such as copy desk chief and team editor and designer. Her previous experience includes copy editing and news for a variety of Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in mass communications and journalism in Iowa’s University of Iowa.
Many or all of the products we feature are from our partners, who we pay. This impacts the types of products we feature and where and how the product is featured on the page. But this doesn’t affect our assessments. Our opinions are our own. Here is a list of and .
If you’re wondering how to reduce your credit card debt, know that you have plenty of companies. Credit card balances grew by 15% in 2021, the largest jump over the past 20 years, according to a November 2022 report from the Federal Reserve Bank of New York.  The Federal Reserve Bank of NY’s Center for Microeconomic Data . . Accessed Nov 15, 2022.
As of September 20, 2022 an average of credit card debt owed per U.S. household with credit card debt is $7,486 according to .
Successfully requires a hands-on approach, from determining your best method of payment to contacting your creditors to discuss rates. This article will help you reduce the amount of credit card debt you have in just four steps.
1. You can choose a payment plan or two
If you are determined to take on your credit card debt, consider these suggestions to get closer to your goal. Having a concrete repayment goal and strategy will help keep you — and your credit card debtunder control.
Pay more than the minimum
Credit card issuers offer you a percentage, typically 2percent on the amount you have. Keep in mind that banks earn their money from the interest they charge every period of billing, therefore the longer it takes you to make payments, the higher they make. The amount of interest that is being paid has been increasing because of Federal Reserve rate hikes and growing amounts of revolving credit card debt. It is believed to be that U.S. households that carry credit card debt will pay an average of $1,380 credit interest this year, according to the study.
Look on your credit card bill for a “Minimum Payment Warning,” which will include a table indicating how long it would take to pay off your balance if you only made minimum payments — and how much interest you’d have to pay.
The process of paying down the debt you owe uses your sense of achievement as motivation. Your debts are ranked in terms of amount, and focus on eliminating the smallest one first. When you’ve paid off that the debt, you can roll that amount into the amount you’re paying toward the next one, and the next one, and so on. As a snowball rolls down a hill, you’ll gradually pay more and more and eventually pay off your debt.
Like the snowball method, an starts with listing your debts. Instead of paying off the debt that has the lowest balance first, you then pay off the card that has the highest interest rate. It could be a quicker and more affordable method than the snowball method.
Automating your payments is a simple way to ensure your debts are paid so you avoid racking up additional costs in late fees. If you’re using the debt snowball or avalanche strategy, you will have to be more hands-on to make sure you’re contributing exactly what you’d like in each of your accounts.
Are you concerned about the economy?
Manage your finances in the face of rising prices as well as market volatility and fears of recession.
2. Consider debt consolidation
If you have a good credit score but your debt payments feel too much, think about putting them into one account. This way, you only have to make one payment each month to chip away at the remaining balance.
A 0% balance transfer credit card
It may seem odd to get credit card when the primary goal is to get out of credit card debt, but can help save you cash in the end. Find a card that offers the longest 0% initial period — preferably 15 to 18 months -and then transfer all of your outstanding credit card debts into that account. You’ll have one simple monthly payment and will not have to be charged interest.
In the same way, you could get a fixed-rate loan to settle your debt. Although you’ll have make payments for interest charges, interest prices for personal loans tend to be lower than those for credit cards but they will aid in saving money. Use a to estimate your savings.
3. Work with your creditors
Contact your creditors to explain the situation. The credit card company might offer to discuss payment terms or offer a , especially if you’re a longtime customer with a history of paying.
If your provider has a hardship plan, it may provide relief when circumstances that are beyond your control, such as illnesses or unemployment impact your ability to manage payments. And even if you aren’t being affected by illness or unemployment and you’re not experiencing any hardship, inflation is creating difficulties for many. Based on the NerdWallet survey, 45% of employed Americans believe that their salaries haven’t increased enough in the last twelve months to keep pace with the rate of inflation.
If you agree to discuss with your issuer or agree to the terms of a hardship plan, either option could lead to more affordable interest rates or waived fees, depending on the issuer.
These small changes might be enough to help you get the debt under control, and the worst you can do is say no.
4. Find help for debt relief
If the amount you owe is greater than you’re able to pay each month , and you’re struggling to get out of debt, it could be time to take more serious steps. You could consider, for example, an approach to managing debt.
Debt management plan
They are made with the help of are created with the help of . Counselors negotiate conditions with your creditors and consolidate your credit card debt. Then, you’ll pay the counseling company monthly at a fixed amount. The credit account you have may be closed, and you might have to stop making new credit cards for a time.
Filing for wipes wipes out the unsecured debt like credit cards, but with consequences. can help you restructure your debts into a payment plan over three to five years. It is a good option if you own assets you would like to keep. It will be on your credit report for seven or 10 years though your credit score is likely to improve during the time following the filing. Certain debts, like and tax debt, typically aren’t erased by bankruptcy.
Under debt settlement, a creditor is willing to pay less than the amount that you owe. Even though it may sound like a great deal but it’s not a viable option for most people. Most often, you contract a debt settlement firm to deal with your creditors on behalf of you. Learn more about the risks you take.
The authors’ bios: Sean Pyles is the host and executive producer on the NerdWallet’s Smart Money podcast. His writing has been featured throughout the pages of The New York Times, USA Today and elsewhere.
Tiffany Lashai Curtis is a senior writer on the personal finance team. She has more than 5 years of experience reporting on topics that affect communities that are marginalized.
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