Category: Credit Card Debt

As per the New York Federal Reserve, U.S. credit cardholders paid down an amazing $82 billion credit card debt in the second quarter of 2020. It is quite astonishing that despite the U.S. unemployment rate skyrocketed at 10.2%, so many consumers have paid off their credit cards. The entire world has been facing so much financial uncertainty over the last few months.

Still, credit cardholders are doing well to keep themselves together and follow the path to lower plastic debt during the pandemic.

If you are one of the consumers who faced difficulties while managing credit card debt, then you should also follow a few ways to pay off credit cards and keep your finances on track.

How to manage credit card debt if you’re affected by the COVID-19 outbreak

Due to the COVID-19 outbreak, many people became unemployed and many had to close their businesses. If you can’t make your credit card payments, you might have to make a few difficult financial decisions for your family and your living.

During such a critical time, several good options that you may choose to stay at your feet and be current on your credit card debt. So, let’s check out those options that may help you to manage and pay off credit cards during the COVID-19 crisis.

1) Try hard and make the minimum payment at least

This might be a difficult option for you if you have recently lost your job or are having issues with your business. But this is the safest option that can make you current and keep the flow running on your credit card bills. You might get financial assistance from your credit card companies, but your interest will be added every month.

So, making the minimum payment on time every month, until you get a decent job, will be helpful to tackle the tough situation. If you don’t pay at all, the interest builds up more debts on the last remaining balance every month.

This way your credit card debts will rise to a level that you can’t reach.

2) Check your credit reports regularly

Many of us would check our credit reports for free, once a year. But it is important to review your credit report regularly, especially during such a horrible financial crisis.

The three major credit reporting agencies – Experian, TransUnion, and Equifax are currently providing the option to the consumers that they can check their credit reports weekly for free.

3) Check your bills closely and look for errors

It won’t be possible for you to manage credit card debt if you do not check your monthly bills and analyze them to find any errors. You should look closely at your credit card statement, and if you find any error, dispute it by sending your credit card company a billing error notice.

Normally, credit card companies would respond within 30 days and confirm that they have received your notice. They won’t take more than 90 days to look into the matter and send a reply to you. However, due to the COVID-19 pandemic, many credit card providers are having issues operating their businesses.

This means that you might have to wait a bit to get a reply from your credit card company. If you want to get out of debt with zero errors in your credit report, make sure you wait until the billing error resolves. If you have such credit card bill errors, and have an ongoing investigation, during that time the credit card company can’t ask you to do these things:

• They can’t demand the amount in dispute
• They can’t report to the credit reporting agencies that the amount in dispute is “unpaid”
• They don’t have the authority to close your account because you filed a billing error notice

4) Sign up for a 0% balance transfer card

If possible, try to get a 0% balance transfer card because it will allow you to avoid interest for up to 21 months. Make sure you search for a card that also allows you a zero transfer fee. But remember, pay off the entire balance before the introductory period ends.

5) Know your rights to debt collection practices

If you have a credit card debt in a collection or a debt collector is contacting you to collect old credit debts, things might become very difficult to cope up with during this financial crisis. Once debt collectors call you, the first thing you should do is to verify their identity to make sure it’s a legitimate collector. Secondly, ask the collector to validate the debt before making any payment.

A debt collector might try to collect a credit card debt that is not yours. It is better to read your rights properly here about debt collection laws.

6) Try side hustles to make your income steady

If you have lost your job or have a business that is about to shut down, start earning again by doing side hustles. Apart from your 9 to 5 job or business, you can do a lot of things to earn additional money.

Trust me, managing credit card debt will be easy if you can earn a few extra dollars by utilizing your spare time. Save money from side hustles and get out of debt faster.

7) Stick to your pre-pandemic budget and keep saving

As you might be running through a short budget, you should plan your purchases and save 5%-10% of your salary (if you have a steady job), and put it into an interest-bearing account. The interest that you gain can be used to pay off credit cards and get out of debt asap.

8) Try not to pay late

The worst thing about having a credit card is missing a payment or paying it late. The consequences of such an incident are severe and you might have to face high late fees or added interest. It also harms your credit score and it can be down by a few points.

This is why it’s important to inform your credit card company asap if you have difficulties paying off your credit card bill.

How to manage credit cards by seeking help from your credit card company

a) Inform your credit card company that you have been affected by the pandemic

First of all, inform the credit card company that you’ve been financially affected by the pandemic, lost your job, or had to close your business, etc. That’s why you need help from them. Most credit card companies are helping their customers by offering programs that may support low-income individuals.

Be prepared to provide proper documentation about your current financial situation. These programs are popularly known as “hardship” or “relief programs.” These programs will offer you to sign an agreement to:

• Make a partial payment
• Refer or pause one or more payments
• Forbear delinquent amounts

b) Get all the information on the programs or credit card relief packages offered

Credit card companies are offering many options to help consumers. But being a consumer, you should ask a few questions before accepting the program. You must prepare a list of questions before you proceed so that you can be comfortable with the terms & conditions offered by the credit card providers. Here are the main questions that you should ask:

• What financial relief programs will be offered if you can’t pay off your credit card bills due to the coronavirus pandemic?
• What are the fees associated with these programs?
• If you can somehow defer or lower the monthly payments, will interest continue to build during this relief program period?
• When do you need to start making credit card bill payments?
• What measures will be taken if your financial situation remains the same as before? Is there an alternate option?
• What information will be sent to the three major credit bureaus?
• Can you use your card when you enroll in the program?

c) Ask for a written copy of the agreement

If you select a financial relief option provided by your credit card company, you need to understand every terms & condition applied to the offer. Make sure you have all the details written in the agreement. Once you sign, get a copy of the agreement as soon as possible.

During the program or relief period, you should always check your statement each month. If you notice any inaccuracy or error, make sure to dispute it by referring back to the agreement.

What if your credit card company offers an agreement or accommodation with you as per the CARES Act:

As per the Coronavirus Aid, Relief, and Economic Security (CARES) Act, creditors will need to fulfill special requirements if they offer payment relief and report your payment information to credit reporting agencies. This CARES Act requirement applies only to agreements made between January 31, 2020, and any of the following two dates:

• 120 days after March 27, 2020, or
• 120 days after the national emergency concerning COVID–19 ends.

How your creditor reports your credit account to credit reporting agencies under the Act may depend on your payment status. They will consider the fact that whether you are current or already delinquent at the time of signing the agreement. They only need to report it if you are making any payments as per the agreement.

Top 10 credit card providers offered a variety of COVID-19 relief options

 

 

Credit Card Company	Fee waiver	Temporary Credit Limit Increases	Temporary Suspension of Payments
Bank of America	Not applicable	No, but late fees can be refunded	Yes
American Express	Not applicable	Yes	No, but payments can be reduced
Capital One	Contact Capital One for options	Contact Capital One for options	Contact Capital One for options
Barclays	Yes, on a case-by-case basis	Yes	Yes
Citi	Yes	Yes	Yes
Chase	Not applicable	Yes	Yes
Not applicable	Not applicable	Yes	Yes
Discover	Contact Discover for options	Contact Discover for options	Contact Discover for options
Wells Fargo	Not applicable	Yes	Yes
HSBC	Not applicable	Yes	Yes

 

Data courtesy-investopedia.com

How much money governments are offering credit card relief

On March 27, President Donald Trump signed a $2 trillion COVID-19 stimulus package for US citizens. As per the program, the majority of fellow Americans received direct payments, considering their income and number of kids. Other important benefits included in the package are expanded unemployment benefits, additional health care support for every individual who qualifies, and funding for dying organizations and small scale industries.

The relief was a big step taken by the government that helped jobless people to stand upon their feet. Weekly unemployment claims hit a record 3.3 million by March 26. Apart from that, Federal and state governments have provided help to the citizens to stop foreclosures and evictions during the outbreak.

A majority of U.S. adults received $1,200 from the federal government, plus $500 per child. In the week of April 13, the IRS started to send 80 million stimulus payments to eligible citizens via direct deposit. The IRS has sent money to at least 160 million people so far in three different ways. The first recipients of that fund had filed federal tax returns for 2018 or 2019.

In the tax return file, the information of direct money deposit by the IRS is added. The CARES Act also extended unemployment benefits for another 13 weeks and increased the payments by $600 per week for many jobless people. The CARES Act also provided many options to help Americans economically. One of these options offers relief from immediate payments to credit card bills.

This option is popular as a credit card forbearance. The main purpose of providing credit card forbearance:

• If a consumer is unable to pay his/her credit card debt, then that person can look into his/her bank’s credit card forbearance program. So, an immediate option is provided to consumers who are unaware of how to manage credit card debt.
• Credit card forbearance is practically an agreement between a consumer and the creditor company. This will help the credit cardholder to get a temporary pause or lower the account payments for a specified amount of time.
• Once a credit cardholder signs up for a credit card forbearance program, his/her credit score doesn’t drop. This is because the cardholder and his/her lender are under an agreement. The lender won’t report the account to the credit reporting agencies which eventually keeps their credit score safe.

Conclusion

People worldwide don’t know how much time we have to wait for this crisis to get past. So, for the time being, people have to keep their patience and work together to overcome the drastic economical situation.

Why should you use credit cards for budgeting in the first place?

If you think from the basic level, credit cards can help you with two important uses for budgeting:

• Help manage your cash flow by allowing 30 days to make interest-free payments.
• Assist you to track each expense you make which is one of the basic steps for budgeting.

A credit card gives you the benefit of maintaining the cash flow. It will also help you to maintain the balance between your income and spending needs each month.

Tracking your expenses is required to assess your spending habits on a month-to-month basis. If you are trying to build a budget with a credit card, there are a few that are available that will help you categorize and chart your expenses.

How to build a budget with a credit card

To use a credit card to build a budgeting strategy, you should first require a workable budget in hand. Collect your latest credit card statement or you may check it online and go through all the transactions. Then, you must categorize your expenses. A budget worksheet would be useful for you in this case. It features common expense categories and it’s easier to add up your money that’s going out. Later you may compare it with the money that’s coming in.

Now you’ll have all the expenses listed in front of you to compare them with your income. The next thing you should do is to find answers to these candid questions:

• What expenses are necessary and you can’t avoid?
• Which expenses you can avoid for a while?
• Is your spending under control?
• Can you manage money for an emergency purpose?
• Are you able to set money aside for savings, retirement, and investments?
• Are you able to pay off your debts properly?

If you are getting positive answers to these questions already, congratulations!

Now, if you don’t have the answers clearly, you may strictly follow these below-given steps and successfully build a budget with a credit card.

Build a budget with a credit card in 5 steps

Once you’re clear with your budgeting strategy, these 5 steps will help you to achieve success:

Step 1- List all of your expenses

When you create a budget for the first time, the initial thing you need to do is to make a list of your actual monthly expenses. You may start by listing everything you pay for every month, such as your mortgage or rent payments, credit card bills, car installments, food costs, utility bills, along with certain annual payments like insurance premiums, etc. List the importance along with other non-essential expenses if you want to become successful with your budget.

Here’s where your credit card statement comes in handy. Make sure to include the few purchases you might have forgotten about. However, to do so, you should make all the payments through your credit cards.

Step 2 – Compare the total expenses with your income

Once all your expenses are listed, it is crucial to compare the total expense with your actual income. Chances are, you already know the answer. If your monthly spending is higher than your monthly income, you’re probably going to fall into debt or are already in deep debt.

On the other hand, if your income is higher than your monthly expenses, you have the option to save money each month. Generally, we use credit cards for paying most of the expenses.

Step 3 – Find out options to cut expenses

One of the best ways to save from your ever-growing expenses is to look for other ways to reduce expenses. After all, reducing non-essential costs and saving money… is the real motto of budgeting in the first place, right?

You may practically set up a budget for spending. For example – if you like to spend $200 a month for “eating out,” you may set up a budget with that number keeping in your budget plan.

Your credit card monthly statement for the last two or three months may help you to analyze how much you’re spending on each category. You need to compare your current month’s expenses in different categories with last month. You need to focus on necessary categories first, such as groceries, utilities, credit card bills, phone bills, meds, etc.

This way you will have a clear picture of your current spending pattern. You will know whether you are spending more or spending less than in the last few months. Once you find out your problem areas, you’ll need to prepare a plan to adjust the expenses meaningfully.

Step 4 – Create realistic budget categories for next month

Once you are aware of the facts of your spending in the last three months, it’ll be the right time to create new budget limits. You can do one thing, take your average spending on the last three months and fix it on each variable category. For next month, try to reduce it down by 20%.

Step 5 – Start the new month with a fresh budget

Once your new budget is ready, start the new month with a brand new budget plan. This is where your credit card can be helpful. For the new month, do not use cash or debit cards to make payments. Instead, start making the entire purchase using your credit card.

You may need to see the current status of your new budget once a week, so take a look at your statement online. Pay your credit card bills in full each month so that you may stay on track and avoid paying interest.

If you find that you are crossing your budget almost every week, you may ask your credit card provider to reduce your credit limit to the amount you intend to charge each month. For example, you might have budgeted $2,000 each for groceries, transport, gym, gas, entertainment, Internet, and cell phones. So, you may ask your credit card company to lower your credit limit to $2500 so that you may stay within your budget and have $500 for emergencies.

Conclusion

A credit card to build a budgeting strategy can be easy as the credit card itself is a valuable tool. But you must keep all the records of your spending, else you can’t create a great budget to manage your finances well.

If you are drowning in huge debt, you might see running away to a different country is the only option for you. Perhaps, in a different country, you can get a good salaried job or a better living style at a low cost. But, if you are escaping on your own land just to get rid of your debts, beware. You may end up with a more critical financial situation.

Also remember, you can’t eradicate your debts by moving to a different country. You still owe the debt and you’re liable to pay it back. Once you come back, you will eventually be discovered by the process server.

Does debt follow you to another country?

Usually, it is difficult to recover credit card debt outside of the country where the debt is owed. But, the debt still remains unpaid and it doesn’t cease to exist.

However, the idea to escape to another country is appealing to avoid huge unpaid debts. The creditors can’t take legal actions in a country where the debtor has run away.

Here’s what happens to your debt if you run away to a foreign land

Your credit score will drop significantly

If you don’t make debt payments for 90 days or more, your credit score will start dropping severely. Once your account gets charged-off, it can be difficult to obtain your previous credit score once again when you return.

You will get an email from the collection companies

If you move to another country without repaying the debts. Your creditors will sell your accounts to the debt collectors. Debt collectors can send you emails repeatedly if they don’t get you over the phone. So, eventually, your credit card debt can’t follow you overseas. But escaping to a different country is not recommended. Why?

U.S. debt collectors can file a lawsuit in the U.S.

The debt collectors can file a lawsuit against you for the unpaid debts. If they win a judgment, they can go after any money, assets, savings, and investment account you leave behind in the U.S. They can even garnish your wages if you still work for any U.S-based company.

You could face a foreign lawsuit

The debt collectors or creditors can file a lawsuit in the county where the debt originated. The case will be decided on the basis of your current country. However, most of the time, the collectors don’t do this as the process is extremely expensive. But, if the debt is huge, then they might file a foreign lawsuit against you.

So, eventually, your credit card debt can’t follow you overseas. But escaping to a different country is not recommended. Why?

Disadvantages of moving abroad to avoid credit card debt

Well, moving abroad can help you to avoid the debt load. But this solution has some crucial drawbacks.

Here you go:

You will face trouble when you come back to your own country

Your creditors or debt collectors can file a lawsuit for unpaid debts, which can affect your credit score significantly. Thus, you will face a lot of issues if you decide even to come back to the U.S.

You need to have enough cash

The whole process of relocating to another country is stressful and expensive. Not every debtor can afford this solution. You may have to sell your existing house or land to get the cash, which can be stressful for you. So, if you are ready to sell your house to relocate to a different country, then you may consider bankruptcy to start afresh.

Finding a steady income can be difficult in a different country

Relocating to a different country is not an easy task. You might be able to avoid the credit card debt by relocating to a foreign land but to survive there, you have to buy a house. And, to do so, you need to have enough cash to secure a residency in a foreign land.

Moreover, to settle in a different country, you need to have a steady income source. If you don’t have any income source and enough cash in hand, then you shouldn’t run away to a foreign land. This can lead to a disaster.

Establishing a credit record can be tough in a foreign country

To stay in a country, you need to buy a house. And, to buy a house, you need to have enough cash. Otherwise, you have to take out a loan, which is difficult due to no credit history. And, remember, establishing a credit history is more difficult in another country compared to the U.S. Moreover, before giving you a loan, your current country can review your credit report. If they understand that you have escaped to their country to avoid the debts, they can deny your home loan application.

So, it is quite expected that, when you are drowning in debt, you may not have the cash to buy a house or build a business in another country to relocate there. So, it is better to leave the idea of relocating. Instead of escaping, you can file for bankruptcy and start a fresh financial life in your own country. Make sure you manage your finances well to get back to robust financial health once again.

You’ll not find too many instances where taking out more unsecured debt to pay off another unsecured debt like credit card bills makes sense. But if you use a personal loan to pay off your credit card debt, you might be saving more on the interest. The debt is still there, but the interest you are paying currently can be reduced.

Too much credit card debt often creates serious financial problems. In fact, owing more on credit card bills than what you can afford in a month is quite troublesome and a waste of money. That’s not all, your outstanding credit card bills would hurt your wallet as well as your credit scores.

Practically, you should always pay off the full credit card bills every month. But if you can’t afford to pay off this huge debt at once, there are still some smart ways to tackle your credit card dues.

Consolidating your credit card debt with a personal loan is one of the smartest ways you can ever find it. These are the two valid reasons:

1. It might be cheaper

Interest rates payable on credit cards are typically quite high. Credit cards which we normally use in general like American Express, Discover, MasterCard, Visa, etc. have interest rates to rise by well over 15%, even for consumers with a good credit score.

If you compare the interest rate of a personal loan with a credit card interest rate, you’ll find the earlier one is quite low and affordable. With a decent credit score, the lender may offer you a better interest rate compared to the market rate.

2. This is a guaranteed option to improve your credit score

Personal loans are also treated as unsecured installment loans. They are quite different from revolving credit accounts like credit cards. So when you take out a personal loan, your credit score doesn’t get the negative impact in the same way as it would get when you incur credit card debt.

Practically, if you are paying off your multiple credit card bills with an installment loan like the personal loan, your credit utilization ratio will be zero, and your credit score will likely increase to a decent mark. But for that, you should keep yourself regular on your new personal loan.

Using a personal loan to consolidate credit cards

Taking out a personal loan to pay off credit cards is also called a credit card consolidation loan. The objective is to get a personal loan with a lower interest rate compared to the interest you are paying on your credit card. Apart from that, setting up a new, easy repayment period is also a motive.

For example, let’s say you have 5 credit cards and a total balance of $9,000. The interest rate is 18.00%. If you are taking out a three-year personal loan with a 12.00% APR, your monthly payment would be lower and the total interest over the life of the loan will also be affordable. In other words, you’d save a good amount of money by opting for a credit card consolidation loan.

Benefits of paying off credit card debt with a personal loan

1. You can lower your interest rates

Taking out a personal loan to consolidate your credit cards can lower the annual interest rate of your credit debts. Paying a lower interest rate may allow you to lower the cost of your debts, and pay off more principally each month, so that you may get out of debt faster.

2. You can get rid of your multiple monthly payments

You can consolidate multiple cards through one personal loan and reduce multiple payments per month. Once you start making only one loan payment, it’ll allow you to focus all of your time and resources on that one payment. It will be easier for you to pay off one loan instead of making multiple payments to several smaller credit cards.

Of course, you must also keep in mind that you should avoid making more credit card balances after consolidating your credit cards. Remember, you have an existing loan to pay off. If you still lose focus on your large debt and start accumulating new credit card debts again, I am afraid you’ll be falling into bigger debt problems soon.

Do you have a bad habit called overspending? Do you often exceed your monthly budget? You need to work on these aspects in order to get out of debt.

3. You can reduce your monthly payments

Using a personal loan to consolidate your debts can also lower your total monthly payments for the debts you owe. If you calculate the total amount you are paying each month as the minimum payment of your existing credit cards, you’ll notice that the monthly payment for your one personal loan will be much lower, compared to that amount.

Lowering your monthly payments can help you invest more money towards debt payments. Using a debt snowball method you can not only tackle your credit cards but can also manage your other debts easily and faster.

For example, if you pay $700 in total per month towards minimum payments to the credit cards, and now paying only $500 per month on your new personal loan, you can easily apply the extra $200 directly to pay off other debts. This strategy will help you get out of debt faster.

Conclusion

It is probably not a good idea to restructure your debts through a personal loan, either by cutting down your monthly payments or lowering your interest rate. Make moving your debt around worthwhile for you. Insist on a lower interest rate and a reduced monthly payment for your debt, so that you can pay off your debt faster and take back control over your finances.

If you need more help with your loan repayment process, consider seeking a consultation with a trusted financial expert.

As the necessities of life are getting dearer, an increasingly large number of people in America are resorting to credit cards for their daily needs. Due to the impact of poor employment and low salary, a large number of people are not having enough cash with which they can make ends meet. Thus, they are using their credit cards to meet daily necessities.

Most people are paying their rent, utility bills, and food costs with the help of their credit cards. Though they’re getting immediate relief, they’re gradually being caught in the vicious trap of consumer credit card debt. Even worse, if they are even late with their payments by a day, they’re subject to an outrageously high-interest rate.

Credit cards are now becoming popular for some important features. People can avoid cyber scams by using credit cards instead of debit cards. In addition to this, people are now more comfortable in doing online transactions instead of carrying cash. Also, some attractive offers and rewards are attracting people to keep various credit cards.

For example, people are now getting a travel card, store card, gas card, and many more. They want to get discounts and earn miles, or points by using their cards. It seems credit cards are the perfect tool for modern people’s lives in an advanced country like America.

But what is not right is the rising credit card debt that our Nation owes. Yes, according to the Federal Reserve, America owes $1.058 trillion in total consumer credit card debt in 128 million U.S. households.

Unfortunately, the average U.S. household has $8,292 credit card debt. And, an individual who is carrying a credit card has $5,839 in debt. In short, people are not managing their credit cards properly. They forget about the basic rule of managing a credit card.

If you analyze the reason behind this high credit card debt in our nation, you will understand that credit cards are becoming a powerful tool for people. They are using the power to get everything that they want. They are constantly applying for new credit cards but they don’t know how to manage them.

Credit cards: The truth about using these powerful tools

People under 21 years can apply for credit cards now. However, they have to show independent income or assets to get approval. The credit card company allows a credit limit while giving the card to the person, which means the maximum outstanding balance you can have on a credit card at a given point of time without getting a penalty. This means, the credit card company only wants to get assured that the person who is asking for a credit card can pay the credit card bills.

But, while using this tool, people are becoming more spendthrift as they consider it as free money. Using a credit card, you are not supposed to pay the bill while buying an item. Just swipe the card to get the item.

People simply forget the fact that they are supposed to pay the bills in full and within time. Even making the minimum payment is not sufficient.
With the present debt situation in the US and the number of debt delinquents, it’s no wonder that the credit card issuers are all skittish about the rising number of risky borrowers.

As the employment rate declines to add fuel to the fire, credit card issuers are all trying their best to limit their risk exposure.

10 Rules for managing credit cards properly to avoid debt

It is clear that U.S. consumers are in huge credit card debt as they fail to follow the credit card rules.
But, knowing the rules can help you to stay away from debt. You can also build a good credit score by managing your credit cards properly.
Here you go:

1. Pay your balance every month

Remember, getting a card is not enough, you should pay the bills in full and within time. Carrying the balance to the next month only increases interest.
Pay the bills in full so that you don’t accumulate interest rates and reach a huge amount in the future.

2. Avoid paying just the minimum payment

Making only the minimum payment on your credit card is not enough. The longer you make just the minimum payments, the more money you’ll accumulate in the form of interest rates.

3. Try to understand the terms of the credit

You need to read the terms and conditions of a credit card while taking out a credit card. Know the interest rates, payment schedule, and fees on the card. It helps to avoid being subject to sudden late fees and penalties that can unnecessarily increase your monthly payments.

4. Don’t use credit cards beyond your affordability

Remember your credit cards just make your life easier but if you use them randomly, you can fall into financial trouble. Because the amount that you charge on your credit card needs to be paid back in full. If you don’t do that, you will be in debt soon. Thus, you shouldn’t buy items using a credit card that you can’t afford in cash.

5. Remember your due dates

Keep track of the due dates so that you don’t miss a single payment. Most credit card companies charge fees for even a late payment. Set reminders to avoid being subject to any kind of additional payments that can increase the scheduled monthly payments that you’re already supposed to make.

6. Avoid falling into bonus and reward traps

Using multiple cards is nothing but luxury and foolishness. Having too many cards just creates more opportunities to get on a spending spree. Avoid applying for more cards just to get the rewards and miles. Remember, these are marketing tactics used by credit card companies. They want you to use a credit card for every purchase. But you shouldn’t do this. Using a credit card just to get points is foolish. Remember, nothing comes free; you are making forced purchases.

7. Create a spending plan

Everyone needs to create a monetary plan and follow it to let go of their high-interest debts. Without a plan, no one can work towards the goal. You should also have a budget that can assist you in tracking your income, expenses, and monitor your savings. Also, you need to create a spending plan before going out with cards. It will help you to avoid frivolous spending.

8. Put your credit card on hold

Restrict the usage of credit cards so that you can stop yourself from accumulating further debt.

9. Pay off high-interest debt first

Debt avalanche methods are a wise way of dealing with credit card debts. Target your account with the highest interest rate and direct all your financial resources towards clearing off that debt amount while making the minimum monthly payments on other cards. After you clear off that debt, target the one with the second-highest rate, and follow the same method.

10. Avoid carrying cards

If you are addicted to getting on a shopping spree, then carry cash instead of credit so that you can at least stop shopping when you exhaust cash. The more you use credit, the more you’ll incur debt and you’ll be bound to repay the money.

Lastly, as America is gradually turning into a cashless country, people should be more knowledgeable about their credit cards. You should also be aware of the federal rules that are continuously being cracked on credit card companies. Always stay within your affordability so that you don’t need to overstretch your budget and fall into debt.

Credit card debt is rising fast in our country. In November 2018, The New York Federal Reserve revealed that the credit card debt has risen by $36 billion in the US.  It is quite obvious that you are one of those who have huge credit card debt. And, the report is also indicating that people are accumulating more credit card debt day by day, which is not good for their financial health.

Credit cards are becoming the most important tools in our daily financial life. Most people don’t prefer cash transactions; they use credit cards for every purchase.

Using credit cards randomly is becoming a habit for us. But this habit has a pitfall. It doesn’t let us stop purchasing items. We keep shopping with our credit cards beyond our affordability. But, when it comes to paying the bill, people either make the minimum payments or ignore the bills totally. Because, in most cases, the credit card bills are beyond their affordability.

As a result, they soon fall into credit card debts and welcome all the financial hassles in their life.

Warning signs that you have too much credit card debt

In most cases, people don’t realize that they have reached an utterly bad financial phase due to their huge debt. Some people even don’t realize that they are sinking into debt until their daily financial lives become difficult. Thus, you have to understand how much credit card debt is too much.

Here are some warning signs that you have too much credit card debt.

Skipping one credit card bill to pay another

It is not at all wise to skip your credit card payments. You should prioritize your credit card payments. Skipping the payment completely is something that you must avoid. If you find yourself struggling hard to find enough cash to make all your credit card payments, then you are already in huge debt. You shouldn’t accumulate more debt.

Charging is more than what you pay

In case you are charging a lot to your credit cards, you need to pay the bills on time. If you are only charging and not paying off your credit card bills, then you are drowning in credit card debt. Thus, do not leave this unattended as this could cause a severe debt situation.

You are only paying the minimum balance only

If you are paying only the interest, the balance continues to grow. Thus, you shouldn’t only make the minimum payments to the outstanding balance. Please pay the full amount and within time. If you can’t pay the full balance and you are only paying the minimum balance, then you are in the vicious cycle of credit card debt. You should get out of it as soon as possible. Otherwise, you will soon get the creditor’s calls.

Ignoring credit card statements

It is not at all advisable for you to ignore your credit card bills. You should realize that ignoring your bills will not at all help you as your debts will keep on increasing. If you have credit card debts, then it is best to tackle this debt before it gets out of control. If you are ignoring your credit card bills as it gives you a panic attack, then you are already sinking into debt.

Using credit cards to meet your fundamental needs

You should realize that your income should be at least sufficient enough to help you buy things that you need for your everyday use. These may be items like clothing, food, gas, etc. Buying things with credit cards and not paying the balance in full indicates that you are in credit card debt. If you are using multiple credit cards for basic things as your bank account is overdrawn, then you are in huge debt. If left unattended, this situation could lead to excessive credit card debts.

You are not making credit card bill payments

If you have started missing credit card bill payments and are not even making the minimum payments, then you are in debt trouble. You should find ways to repay all your outstanding debts so that you can get back to a normal financial life.

You are realizing that the paycheck is not sufficient

If you are unable to even live paycheck to paycheck as your debt has started consuming half of your monthly income, then you are in huge debt. You should take solid steps to get rid of your debts so that you can manage other household costs with your income.

How can you reduce your credit card debt?

When you use your credit card irresponsibly, you can come under a mountain of credit card debt that may get very difficult to eliminate.
But there are some ways you can reduce your credit card debt and also get out of it.

Here’s how

1. Consolidate your debts

You can take out a consolidation loan to repay all your outstanding balance. By doing so you just need to manage only the new loan. However, you shouldn’t miss a single payment for the new loan. Otherwise, you will be in debt again.

However, you may not be able to take out a loan at a lower interest rate since you have a low credit score due to huge debts. But you should try your best to find a consolidation loan that comes with a low-interest rate.

If you can’t get a loan with a favorable interest rate, then you can consolidate your debts by enrolling with a debt consolidation company. This way you can get rid of your credit card debts.

2. Repay the highest interest rate debt on your own

If you want to reduce your credit card debt fast, then you should attack the debts that have the highest interest. You can repay the highest interest debt by following the debt avalanche method.

In this method, you need to arrange your debts from the highest to lowest interest order. Now, you need to make larger payments to the highest interest debt while making minimum payments to the other debts. Keep making large payments until the debt is paid off.

Once you repay the highest interest debt, target the second-highest interest debt and make a large payment toward it while making minimum payments to the other debts.

Follow this method until all your debts are paid off.

However, to follow this debt repayment method, you should have a good income. So, before following this method, try to increase your income as much as possible so that you can make bigger payments to the highest interest debt.

3. Settle your debts

You can also settle your credit card debt through a debt settlement company. You just need to enroll in the settlement program. The rest will be taken care of by the settlement company. After a certain time, you will be debt-free.

Lastly, to avoid further credit card debts, you need to build an emergency fund. Because, when emergency situations arise, you may need a lot of money all at once. If you do not have an emergency fund, then you will have to either use your credit card or take someone else’s help. In maximum cases, you will be forced to use your credit cards to pay for such emergencies. These debts will be very difficult to pay off as your budget will already be stretched. So, after getting rid of your current debts, practice good financial habits so that you can build an emergency fund and avoid credit cards for your basic needs. If you can incorporate good financial habits, you do not have to drown in debt and seek debt relief.