Credit Card Debt

In America

In 2019, it was estimated the overall consumer credit card debt in the U.S had reached roughly $1.06 trillion. This is after a nearly 20% increase in consumer debt within the past 5 years. What does this mean? It means you are not the only one trying to find their way out of debt. While some households in America report spending more than they earn, this has caused many to rely on credit cards to make ends meet. Over time this contributes to more debt in the form of interest and fees as the cycle continues.

Credit Cards Can Be Good or Bad, It’s All Up To You…

Credit cards do not always have to be a burden. When you are wise about spending and can afford to consistently make payments on time, credit cards can in fact improve your financial credit status. They can also be extremely helpful during an emergency or when making bigger purchases that you may not have the cash on hand for. 

​Remaining in good standings with credit card companies may help you get approved for larger loans later on such as auto financing or mortgage loan as well. 

​Unfortunately, we live in a world of instant gratification, where lenders and retailers are all too happy to sell us a bunch of stuff to make a profit, while you go further in debt trying to pay it off and stay on top of the bills.

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Credit Card Debt Can Spiral

Out of Control Quickly

Credit card companies make it even easier for you to ignore that existing balance with incentives to continue making purchases such as low, or even 0% interest rates for a promotional period of time, cashback and point systems. Only to raise the fees and interest rates shortly after you’ve committed. These deals often favor the credit card companies because you end up impulsively spending trying to save a few dollars here and there.

​Tempting credit offers, poor financial management, and unnecessary spending are not entirely to blame for credit card debt going unresolved. You may have recently suffered financial hardship such as the loss of a job or a spouse and have temporarily relied on your lines of credit to make ends meet. Since we have no control over when these things happen in life, it is best to spend responsibly and be aware of our credit card spending habits

The Warning Signs of

Credit Card Debt

Many believe you are already handling your credit card debt the best way possible, simply because they make payments. However, f you can relate to any of the scenarios below, it may be time to give us a call and see what else you can be doing to reach financial freedom

  •  
  • Most of your credit cards are maxed out
  • Using credit cards to make everyday purchases such as groceries and entertainment
  • You can only afford to make minimum payments
  • Often spending more than you earn each month
  • Increasing interest rates as a result of missed or late payments
  • You are unsure of the total balance and just continue making payments to keep it open
  • Using one line of credit to pay off another
  • Having the same argument about your spending habits with loved ones
  • You recently were turned down for a new line of credit or personal loan
  • Creditors call nonstop trying to collect on overdue bills
  • You have considered filing for bankruptcy

The DO NOT's Of

Credit Card Debt

  • Do not simply ignore your debt. We understand facing hundreds, even thousands of dollars in credit card debt can be overwhelming and discouraging. However, the worst thing you can do if you have hopes of fixing your financial debt is nothing.

  • Standing by and letting your credit card debt go unresolved can ruin your credit report and be extremely difficult to remove should it go to collections. It is always better to enlist the help of a trained professional to learn all the options available to you to stay on top of credit card debt.

The Repercussions

Will Be Served

  • Do not file for bankruptcy because of credit card debt alone. Filing for Chapter 7 Bankruptcy is one way to eliminate credit card debt as well as other unsecured debts such as outstanding medical expenses, accounts in collection and unpaid utilities bills over a certain amount. However, you are still responsible for your secured debts such as your mortgage payments, auto loans, child support and repair bills to name a few. 

    Just know, hitting ‘refresh” on your finances does not go with repercussions. Bankruptcy usually remains on your credit report anywhere from 7 to 10 years, making it extremely difficult to be approved for new or larger lines of credit later on. Should you be approved, it will likely be accompanied by high-interest rates or excessive deposits as lenders will see you as “high risk”.

Don't Close Those Cards

Credit Card Debt

  • Do not close credit cards because of incurred debt and interest. Some of you may feel like you are at a point of no return and your only option is to close the account and pay it off later. This in fact can have horrible effects on your credit score and credit history. 

    Roughly 30% of your total credit score is based on credit utilization. This means how much credit has been used compared to how much is available to you. By closing accounts, you decrease the amount available, while the amount used stays the same. This can have negative impacts your credit report standings, especially if the account has been open more than one year. 


    Also, about 15% of your credit history is determined by how long you have maintained open lines of credit. While you may be guilty of a few late payments, creditors like to see accounts remain open and active.  Closing a credit card account that has remained open for some time because you are unable to make substantial payments could affect your credit history and future approvals. 

Effective Ways to Manage

Credit Card Debt

  • When you decided you need to do something about your debt, you will learn about two of the most effective debt relief strategies to help you lift the burden of debt.

    ​Developed by financial expert Dave Ramsey, snowballing is a great way to build moral and momentum when paying off outstanding balances. 

    ​Begin by listing your credit card debts in order from lowest to the highest balance owed. 

    ​Then commit to fully paying off the balance of your lowest debt, while still making the minimum payments on all the rest. This smaller amount will be paid off in no time, giving you more energy and funds to successfully work through the remainder.

Debt Stacking

Debt Stacking is the opposite of snowballing, as it requires you to list your debts in order from the greatest amount owed to least. This is an equally effective method, however requires large amounts of self-discipline and a serious desire to become debt-free. While it may take a little longer to reflect on your overall credit report and financial standings, this method in fact, does save you money over time by keeping interest rates on bigger purchases low, while you continue paying off the balance.

If you are not sure which option is the best for you and your financial debt, give us a call today! We specialize in debt settlement and are eager to start negotiating on your behalf to get you on the road to being debt-free!

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