Understanding the Options and Consequences of Credit Card Debt

Debt is a small word that can feel like a huge burden. It sneaks up on you when you are least prepared. The digital world makes it so easy to acquire credit cards and loans that many people take on debt without fully understanding the long-term implications of signing their name on the dotted line. We sign up, spend, and forget that every transaction represents a real dollar amount that we will later owe.

It should come as no surprise that credit card debt in the United States hit a record level last year. In 2018, the average American carried a credit card balance of $6,375. That’s an increase of 3 percent from just one year earlier. However, it’s not unheard of for people to walk around with tens of thousands of dollars in credit card debt before they even turn 25. Young people use credit cards as their financial lifelines while they complete school, charging essentials like rent, transportation, and groceries onto their card month after month. There are many reasons why people get trapped under credit card debt, but the bigger question is how to get out of it. There are several strategies that can help you to see the light at the end of the tunnel when it comes to mounting credit card bills.

Looking at Your Options for Getting Out from Under Credit Card Debt

If your chances of paying off bills without the use of intervention are looking slim, then you should consider consolidating your debt. Consolidation is helpful because it allows you to pay a single monthly bill instead of juggling multiple different ones. It not only helps if your debt is scattered across multiple lenders, but it can also stabilize your interest rate. Regardless of how consistent you are with your payments, fully paying off your debt can feel impossible if their interest rates are too high. Consolidation allows you to lock in all of your debt under one interest rate that is more manageable. Credit card companies are often willing to work with customers to create a plan for consolidation because they’d rather be paid something than nothing at all.

One of the only ways to tackle credit card debt is to pay more each month than you’re required to pay. Making minimum monthly payments on a balance is one of the best ways to guarantee that a balance will be hanging around for many years to come. Sometimes the only way to get out from under the weight of a hefty balance is to make some sacrifices in order to bulk up your monthly payments. While this option can feel painful at first, you are actually creating a much easier future.

Budgeting is extremely crucial if you’re falling into the trap of getting stuck with credit card debt over and over again. It is important to take stock of your monthly budget and be realistic about what you can afford in terms of rent, entertainment and other categories. Make a commitment to meet all of your monthly financial obligations without turning to credit cards.

The Consequences of Missing Credit Card Payments

Creditors have many resources available when it comes to collecting late or absent payments. You can really poison your financial health for years to come if you fall behind on payments. Credit card companies could increase interest rates and apply penalty fees if you miss just one payment. In addition, your nonpayment will be reported to credit agencies and bring your credit score down, which could cause big trouble if you plan on applying for a mortgage or loan in the future. You could ultimately face lawsuits or have liens placed on your bank account if you fail to take any action. The bottom line is that the time to act is before you feel like you’re sinking under the weight of credit card debt. Most companies will work with you to at least get some sort of payment plan in place.

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