Credit Card Debt Help Guide

Do you need credit card debt help? How to decide if it’s time to seek professional help.

Take Consolidated Credit’s simple 3-question credit card debt help test!

Most people would prefer to solve debt problems on their own, but that’s not always possible. So how do you know when you can do it yourself versus when you need professional credit card debt help? Answer the three questions below to see if you need help to eliminate your high interest rate credit card debt.

How is your budget?
How would you rate your credit?
How much unsecured debt do you have, in total? (credit cards, unpaid medical bills, personal loans, payday loans)

5 Signs You Need Credit Card Debt Help

The following table offers some helpful guidelines you can use to determine when it’s time to seek professional help with credit card debt. You may need debt help if you meet even one of these criteria.

Credit ScoreLess than 600
Total Credit Card Debt$35,000 or more
Payment StatusJust starting to fall behind or already behind
Cash Flow in BudgetNo extra cash to eliminate debt

15 Smart Tips If You Need Help with Credit Card Debt Now

If you aren’t quite ready to seek professional credit card debt help, these tips can help you find debt relief now. Adjusting your credit card repayment strategy could provide the boost you need to eliminate debt on your own.

#1: Make a budget that focuses on debt elimination

If you want to pay off debt quickly, you need to develop a formal budget. This allows you to:

  • See where your cash is going
  • Balance your income and expenses
  • Cut back on discretionary expenses (wants) so you have more cash flow
  • Close “spending leaks”

First you see what you budget looks like today by evaluating all your income and expenses. Then you make cuts to anything that’s not a necessity so you can focus on debt repayment. The idea is to free up as much cash as possible so you have money to make larger payments.

Remember, anything you cut is only temporary! You can end all the frills back in once you’ve finishing paying off your debt.

#2: Pay more than the minimum payment requirement

Minimum payment requirements are not designed to pay off debt efficiently. They only pay back a small percentage of your balance. In addition, most of that payment gets eaten up by accrued monthly interest charges.

Let’s say you have a credit card with average APR of 16% and you owe $1,000. The credit card has a standard payment schedule where you pay 2.5% of the current balance.

  • Minimum payment = $25
  • Accrued interest charges = $13.33
  • Principal repaid = $11.67

Over half of the payment goes to interest charges, so you barely make a dent in the principal debt. And that’s with average APR! If you use reward credit cards, APR can be over 20%. At that high of a rate, more than 2/3 of your payment is eaten up by interest charges.

So, if you want to get out of debt quickly, you need to pay more than the minimum payment requirements. Focus on eliminating one debt at a time using a debt reduction strategy.

#3: Build in emergency savings so you can stop charging

Use emergency savings to stay afloatAnother key thing you need to do with the budget you create is to build in emergency savings. Do not just leave savings for whatever you have left at the end of the month! That’s a good way to ensure you never save anything at all.

Instead, savings should be treated as a recurring expense. It’s essentially a bill that you pay yourself. Use your budget to see how much you can afford to save. Ideally it should be between 5-10%, but anything is better than nothing. Now set that amount as an expense in your budget.

Setting up emergency savings is crucial, because it’s the only way you can stop charging. Most people don’t run up credit card debt by buying frivolous things. In reality, people get into debt using credit cards to cover daily expenses and emergencies. Your budget fixes the issue of daily expenses, but if you don’t account for unexpected expenses, you’ll keep charging.

This means you need to factor in savings at the same time you focus on paying off debt. If you do one without the other, you won’t get the results you want. Emergency expenses always come up, and if you wind up charging them your balances will continue to increase.

#4: Always pay on time

The worst thing you can do when you’re focusing on repaying debt is pay a bill late. This incurs both penalty fees and penalty APR. Penalty APR is a higher interest rate than what you usually pay. It can be double your regular rate. Once a creditor applies penalty APR, you must make six consecutive payments to restore your original rate.

So, make sure to stay on top of your bills. If possible, set up auto pay through the creditor or your bank or credit union. If you have too many credit cards that all come due around the same time, talk to your creditors. You can request a specific due date for a bill. That way, you can space the bills out over the month and match them to when you receive paychecks. This can make it easier to avoid late payments.

#5: But if you must pay late, never miss payments by more than 30 days

Creditors don’t report a late payment to the credit bureaus until it’s officially “missed” – when it’s 30 days late. At that point, they report the missed payment to the credit bureaus and it shows up on your credit report. That missed payment will stick around on your credit report for seven years from the date it was reported.

Missed payments are extremely bad for your credit. Credit history is the biggest factor used to calculate your credit score. So, when you miss payments, they can significantly affect your credit score. In turn, a lower score means you have fewer options for debt relief if you decide traditional payments aren’t working.

#6: Call your creditors to negotiate lower interest rates

Call your credit card company regularly to negotiate rates and feesSince high APR makes it harder to pay off debt, it makes sense that you need lower interest rates. The first thing you can try to reduce the APR applied to your debt is to talk to each creditor. Call the customer service department and ask to speak with someone about reducing your rates.

You will have more success if:

  • Your credit score has improved since you opened the account
  • You’ve haven’t missed any payments
  • You’ve been a loyal, active customer for a number of years

Lower is always better. Keep in mind where average interest rates are and where your credit stands. If you have excellent credit, then your rates should at least be comparable to average rates today.

#7: See if your creditors are willing to be flexible

If you have a large balance to repay on an account, ask the creditor to set up a repayment plan. You arrange a fixed payment schedule, where you pay a fixed amount each month instead of the minimum payment.

The creditor may require that you freeze the account during the repayment period. That means you won’t be able to make new charges on the account until you finish paying off the balance. But in exchange, they may agree to reduce or even eliminate interest charges on your account.

Just keep in mind that results may vary based on the creditor and your relationship with them.

Ronnie from Nashville, TN

I had some success calling creditors on my own. It went pretty well. One creditor froze the account and dropped our interest rate to 0%. But another creditor was only willing to lower my interest rate to 15%.

If a creditor agrees to set up a repayment plan, make sure you stick to it! A creditor won’t be as willing to negotiate and be flexible if you break a repayment agreement. They will also restore your original rates and apply new penalties. So, only make a repayment plan if you know you can keep up with the payments.

#8: Consider the benefits of balance transfers

A balance transfer credit card allows you to transfer balances from your existing accounts for a small fee. These cards offer low APR on transferred debt. With good credit, you can also qualify for 0% APR promotion periods, usually anywhere from 6-18 months. This gives you time to pay off your debt interest free.

Keep in mind that 0% promotion periods won’t last forever, so this solution only works for finite amounts of debt. For instance, let’s say you owe $4,000 on several credit cards. You get a balance transfer card with a transfer fee of $3 per transfer. So, the added cost of the transfers is $9 total. You have good credit so you qualify for a 12-month promotion period. To eliminate the debt in-full within 12 months, you’d paid around $335.

But if you try to use that same strategy for a $14,000 debt, it’s very different. To pay that amount off in-full would require payments over $1,150. If you can’t afford that, then this transfer strategy is not as effective.

#9: If you owe more than $10,000, it’s time for a debt consolidation loan

At a certain point, your balances get so high that paying them off using traditional means is not effective. Even balance transfers won’t get you where you need to be. When this happens – and it’s usually around $10,000 for most people – you need a debt consolidation loan.

A debt consolidation loan is an unsecured personal loan that you take out at a low fixed interest rate. The term usually extends between 24 to 60 months or 2 to 5 years. You use the funds you receive to pay off your credit card balances. This leaves only the loan to repay.

This can be a highly effective way to pay off credit card debt fast. However, it requires some will power and careful budgeting to work. Once you get the loan and pay off your credit cards, you’ll have a bunch of open credit lines that are back to $0. It can be really tempting to start charging again. But if you run up new balances before you pay off the loan, you end up with more debt instead of less. You basically made things worse.

So, if you take out a debt consolidation loan, make sure to rebalance your budget. The credit card payments would be out and the loan payment would be in. The good news is that consolidation loans often lower your total monthly payments. This gives you more money to save in your emergency fund to avoid unexpected credit card charges. After that, it’s up to you to avoid things like impulse purchases.

#10: The best thing for your credit is to bring delinquent accounts current

If you’ve let some accounts lapse into delinquency, then the best thing you can do is to bring them current. This will stop further damage to your credit score. Each payment you make that does not bring your balance current still counts as a missed payment. So, even if you make a payment that month, you could still generate negative credit history because the account is still behind. To avoid more damage, you need to catch up.

Several of the solutions we explain above can help you do this quickly. First, start by calling the creditor to set up a repayment plan. If you still have at least fair credit, given the missed payments, see if you can qualify for a balance transfer or consolidation loan. In both cases, transferring the balance or paying it off with a personal loan would bring the account current.

If none of that works, move on to the next tip!

#11: Don’t put off asking for professional help

Professional credit card debt help can make it easier to reach zero Not every credit card debt problem can be solved on your own. If you owe too much or have too much credit damage, it may be almost impossible to reach zero on your own. If so, then it’s time to call in the professionals. And there’s no shame in doing so! It’s not admitting defeat, it’s getting the tools you need to reach zero.

Your first stop should be a nonprofit consumer credit counseling agency. These agencies exist to help consumers get out of debt. So, they’re your best option to get an unbiased opinion on your best path out of debt. They’ll review your debt, credit and budget to make sure do-it-yourself options won’t work.

If so, they’ll see if you’re eligible for a debt management program. This is basically a super-charged repayment plan with professional support. Instead of making one plan for each creditor, the counseling team helps you set up one repayment plan that covers all your debts. They also negotiate to reduce or eliminate interest charges on your behalf.

Since credit counseling agencies have established relationships with creditors and proven track records, creditors are often more willing to negotiate. This means you can have more success working with an agency over trying to negotiate and arrange payment plans on your own.

If you aren’t eligible for a debt management program, you still have one option left before declaring bankruptcy – debt settlement. This is where you settle debts for less than the full amount you owe. You offer a percentage of what you owe and the creditor agrees to discharge the remaining balance.

#12: Only consider debt settlement if you don’t care about credit damage

Debt settlement is not a bad solution, but you need to be aware of the negative effects. Each debt you settle creates a negative item on your credit report that sticks around for seven years.

What’s more, debt settlement companies often tell you to stop paying your creditors to generate funds for your settlements. This means that you damage your credit history, too. All this damage will likely mean you end up with a bad credit score. As a result, it takes longer to recover once you get out of debt.

Of course, if your credit already hit rock bottom, it’s hard to fall off the floor. In this case, credit damage may be something you’re willing to take. If most of your debts are in collections, debt settlement may be a viable option. However, check with a credit counselor first to make sure you don’t have any other avenues to get out of debt. If you don’t, then using the “nuclear option” might be the best path forward.

#13: Don’t make your financial situation worse just to pay off credit card debt

There are some resources on the internet that offer with credit card debt help which include solutions you should avoid. At Consolidated Credit, we believe in the “do no harm” method of credit card debt help. In other words, you shouldn’t make your financial situation worse or put yourself on shaky ground to pay off credit card debt.

  • Don’t tap your retirement accounts! You’ve done the right thing and saved for retirement. That money is earning money. If you take it out now, you’ll work twice as hard to get back to where you need to be. What’s more, you’ll pay penalties for withdrawing it early – and it gets taxed as income, so you pay taxes on it, too. So, unless there’s no other option available, don’t touch that money, particularly just to pay off a few credit cards. Hardship withdrawals should only be made in situations of extreme hardship.
  • Don’t tap your home equity just to pay off credit card debt either! If you’re a homeowner, you have financing options like a home equity loan, HELOC and cash-out refinance that you can use. But these should not be used solely for the purpose of paying off credit card debt. If you have funds left from equity financing and want to pay a few credit cards, that’s fine. But don’t use these options expressly to get out of credit card debt. You effectively convert unsecured debt (credit cards) to secured debt (mortgage). As a result, you can wind up in foreclosure if you fall behind with the payments. It’s not worth the risk!

#14: “Alternative financing solutions” are not solutions

Alternative financial solutions (AFS) are defined as any financing option that does not require a credit check for approval. This includes:

  • Payday loans
  • Short-term installment loans
  • Cash advance loans
  • Title loans

AFS often come with high finance charges and even higher interest rates. In the case of title loans, you put up a car title to get cash. In every case, you take on more risk than is worth the reward of paying off your credit cards. In addition, these solutions rarely prove effective.

Short-term installment loans (which are also payday loans and cash advance loans) are not designed to be debt solutions. At best, they are stopgap measures you can use to cover emergencies when you don’t have enough cash. But if you’re using them to pay bills or cover daily expenses, you’re in for a world of hurt.

These solutions often use auto debit (ACH) withdrawals that take money directly out of your account. This can lead to NSF fees if you don’t have funds in your account. They drain what little money you have. And when you don’t pay the full balance off at the end of the two-week term, you can be hit with interest charges over 400%.

If you can’t borrow any more through regular channels, don’t turn to AFS. If no other solutions are left, it may be time to declare bankruptcy.

#15: Check your credit reports along the way

Learn how to review your credit report to identify errorsNo matter which solution you end up using to get help with credit card debt, check your credit. By law, you can download your credit report for free once every twelve months from each credit bureau. That means you technically have three free downloads per year, since there are three credit bureaus.

If you’re eliminating credit card debt, you’ll want to monitor your credit reports to ensure they reflect the eliminated debt. Accounts should show zero balances or show as paid as agreed. If you’re enrolled in a debt management program, you can also see that all your payments show as paid on time.

At the very least, once you complete your debt elimination strategy, you should check your credit. It’s even better to spread the three downloads out so you can check your credit periodically as you go. If you see missed payments that were made as agreed or accounts that show an out-of-date status, you’ll need to repair your credit.

Enrolling in a credit counseling program can help you reach zero fasterA nonprofit consumer credit counseling agency is often the best company to help with credit card debt problems.

  • Credit counselors are certified, so you know you can trust their advice
  • They are well versed in all options available to solve problems with credit card debt
  • Since these agencies are nonprofit, you don’t pay anything for a debt evaluation
  • Credit counselors are required to help you identify the best debt relief option for your situation, even if it’s not a debt management program
  • This means you can get an unbiased, expert opinion on the best way to get out of debt in your situation, instead of someone trying to “sell” you something

What types of credit card debt help are available?

Outside of basic counseling to help you find the right solution, there are two types of credit card debt help:

  1. Debt management programs (DMP)
  2. Debt settlement programs (DSP)

Both are viable solutions to use in certain situations. A debt management program is usually the first option that you want to consider, because it doesn’t damage your credit. It lowers or eliminates interest charges to make it faster and easier to pay off everything you owe. As a result, you don’t hurt your credit score using this option.

Still, interest rate negotiation only matters if your debts are with the original creditors. If most of your debts are in collections, you don’t get as much benefit from a DMP. You may also not be as concerned about credit damage, since late payments and collections have already hurt your score. In this case, settlement may be the better option. You want a fast exit that minimizes what you pay overall.

Are there any self-help credit card debt solutions I can use?

There are two solutions that basically allow you to help yourself get out of debt faster:

  1. Credit card balance transfer
  2. Debt consolidation loan

Both require you to have good credit in order to qualify. They also only work for limited amounts of debt. Balance transfers are usually best if you owe less than $5,000; consolidation loans work best if you owe less than $35,000.