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For all their perks, credit cards have one big drawback. Cardholders often end up with credit card debt, which is both stressful to deal with and expensive to repay. Here's how to get out of credit card debt -- and how to avoid it in the future.
There are two keys to getting out of credit card debt:
Go over your income and essential expenses to figure out how much you can pay per month. For example, if you take home $6,000 per month and spend $4,000 on necessities, that leaves $2,000. It might not be realistic to plan on using all $2,000 to pay off debt, but you could commit to putting $1,000 or $1,500 of that per month toward your credit cards.
The most important part of paying off credit card debt is changing your financial habits. It's all about cutting credit card spending and getting in the habit of paying down card balances as much as you can.
There's no substitute for doing this. There are, however, some methods that could help you save money or speed up the repayment process. Here's what you may want to consider depending on your situation.
A balance transfer credit card is a credit card you can use to pay off other cards. You're essentially moving your debt from one credit card to another. Why would you do that? The best balance transfer cards have a big advantage over traditional credit cards -- a 0% intro APR on balance transfers. For an introductory period, they don't charge interest on debt you transfer over from other credit cards.
You can transfer multiple credit card balances to a single balance transfer credit card. This is a good way to consolidate your credit card debt. Instead of having to juggle several credit card bills every month, you'll have just one credit card to pay off.
There are two things to know about balance transfer credit cards:
LEARN MORE: A Complete Guide to Balance Transfers
A debt consolidation loan is a personal loan you can use to pay off credit card debt. Like balance transfer credit cards, debt consolidation loans have a couple of key benefits:
Another advantage of debt consolidation loans is the structure they provide. Your loan will have a set term, such as 48 or 60 months. After that amount of time, your debt will be paid off (if you keep up with payments).
It will also have a fixed payment amount. This can make it easier to stay on track than with credit cards, which have small minimum payments and open-ended repayment timeframes.
COMPARE OPTIONS: Best Debt Consolidation Loans
Military families can get a form of government help with credit card debt. The Servicemembers Civil Relief Act (SCRA) limits the interest rate a lender can charge while you're on active duty. For debt taken out before you started active duty, lenders can only charge you 6%. That's much less than what most credit cards charge.
You need to notify creditors in writing if you qualify for the SCRA. This notice must include a copy of your military orders or another appropriate indicator of your service. You also need to send notice within 180 days of when your military service ends.
You may be able to call your card issuers to negotiate the terms of your debt. In some cases, credit card companies are open to lowering interest rates or monthly payment amounts for cardholders.
Another option, if you have some money saved, is to propose a credit card debt settlement. With this method, you offer the card issuer one lump-sum payment to settle your debt. However, this can negatively affect your credit score, and the card issuer will almost certainly close your credit card account. That could be a big drawback, especially if you have one of the top credit cards and want to keep it open.
If you have too much credit card debt to realistically pay off, you can file bankruptcy. There are two chapters of bankruptcy that you could apply for:
Either type of bankruptcy will cause your credit score to drop quite a bit. All your credit cards will also be canceled. Because of the consequences, bankruptcy is a last resort. It's worth considering if you're unable to keep up with your credit card payments.
If you don't pay off your credit card debt, it can cost you money, damage your credit score, and even lead to legal problems. Here's a detailed rundown of what can happen when you're delinquent on credit card debt:
There's always a way out of credit card debt, so never ignore it. You can file bankruptcy in a worst-case scenario, but in most cases, it's possible to pay it off.
Dealing with a large amount of credit card debt? Check out The Ascent's guide for How to Pay Off $25,000 or More in Credit Card Debt.
Use our credit card repayment calculator below to come up with a payment plan. You can plug in your monthly payment amount or your desired payoff time frame.
The best way to prevent credit card debt is to pay your cards off in full every month. That's easier said than done, but there are a few ways to avoid overspending:
Credit card debt is a challenge that many people face. Now that you know how to get rid of it, you can figure out the right plan of attack and start paying as much as possible toward your credit cards. It may take time, but if you keep at it, you'll be debt free.
Here are some other questions we've answered:
Credit card debt is the amount of money you owe on your credit cards. The amount of your credit card debt will change as you use your cards and make payments. When you make purchases using a credit card, your credit card debt will increase. When you make payments toward your balance, it will decrease.
To get out of credit card debt, put all your extra money toward your card balances. The more you pay, the faster you'll get out of debt. It's also a good idea to stop using your credit cards to avoid adding to your debt. You may also want to look into financial tools designed to help with getting out of debt, such as balance transfer credit cards or debt consolidation loans.
While there aren't government debt relief programs for credit card debt, members of the military can qualify for the Servicemembers Civil Relief Act (SCRA). Under the SCRA, active-duty military are entitled to interest rates no higher than 6% on debts taken out before they started active duty.
The SCRA covers all types of debt, including credit card debt. To qualify, you must notify the creditor in writing within 180 days of completing your military service.
You can stay out of credit card debt by always paying your card's entire statement balance. If you do that, you won't be charged interest on your purchases or end up in debt. To ensure you don't need to carry a credit card balance, set up a spending plan for yourself and make sure you have an emergency fund for unexpected expenses.
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Please note that this calculator is not personalized financial advice and should not be considered or used as such. Nor are we promising that by use of this calculator, will you be able to save more money, preserve wealth, or otherwise.