There are many reasons why people find themselves in credit card debt. It’s often easy to assume that those struggling with credit card debt fell for the lure of “buy now, pay later” and this overwhelmed their rational brains, but realistically, this isn’t the case.
Why Do People Get Into Credit Card Debt?
Credit card debt can mount and compound in a way that it grows stealthily, without warning, until you are one missed payment away from facing exorbitant late fees, interest rate increases and other penalties that effectively trap you in debt. When a penalty interest rate is in place, and with no way to reduce it, you could be faced with an APR of up to 30%, many times higher than your previous interest rate.
It can also be the result of family or economic problems. A sudden move, lost job or divorce can all have devastating financial consequences. Large unforeseen expenses can also contribute to credit card debt, as car repairs, home repairs or medical expenses get placed on a credit card for what was intended as a temporary solution.
Whatever the reason for your it, there are ways to deal with it and get real credit card debt relief and you don’t have to be a statistic.
Options For Credit Card Debt Relief
The first option, is to continue paying on the debt, but allocating more money to it. This is not always possible for some debtors, particularly those with fixed incomes. While most credit cards offer an explanation of how long it will take to pay a debt using minimum payments, finding the extra money may simply not be an option. This option also relies on self-policing and using willpower to resist the temptation to charge more as the debt is paid.
The second option is a refinancing loan. Many banks will loan money, at a more favorable rate, to help pay off credit card debt. Sometimes this is conditioned upon the cancellation of the credit cards, but it has the added benefit of acting as a loan obligation with which you are current, and of allowing you to pay down the debt quicker. For those with poor credit, this may not be a possibility.
Searching For Credit Card Debt Relief Doesn't Have To Be Burdensome
A third option is bankruptcy. Depending on your location and situation, you may be faced with requirements including debt counseling and your bankruptcy may require you to attempt financial restructuring rather than outright discharge. You may have a limit to the amount of equity you can retain in your home, and to the personal property you can keep after bankruptcy. This will result in either a payment plan to satisfy your creditors, or a discharge of unsecured debts including credit cards that have not proceeded through the collection phase. The filing of a petition for bankruptcy will, at the very least, stop immediate collection attempts, but bankruptcy may negatively impact your future credit.
A fourth option is negotiating with your credit card company. While some people report great success simply by calling and talking with their credit card companies, recently the companies have tightened their purse strings and are less likely to negotiate. This is particularly true if you have poor credit, or are unlikely to be able to qualify for alternative credit, but have continued making payments. The credit card companies have no incentive to work with you, since they feel you can’t pay them off and leave, however they also know that you’ve been diligent about paying. In this situation, some people advocate a “strategic default”, where you withhold payment for a number of months. This can be devastating to your credit score, but indicates to the credit card company that you are having financial difficulty and they may not be able to collect. Using the withheld payment amounts, you can then negotiate a settlement amount of less than the total principal owed.
These are just a few of the options available for dealing with credit card debt, but it is important to know that like many problems, credit card debt can be dealt with.
You can find out many other ways to get out of debt or debt consolidation on this site.
Head to the home debt consolidation page for more related posts.