Paying off credit card debt should feel like a race to the finish, but often it feels more like you’re stuck running on a treadmill.
You make payments month after month, but you never seem to get anywhere. So, why can’t you eliminate credit card debt quickly?
Credit card companies are not evil, but as businesses, they exist to make a profit. They extend a line of credit for you to use and interest charges are the cost of that convenience. That’s how your creditors make revenue, so they’re fine if you stay in debt forever.
Minimum payment schedules are not efficient methods of debt repayment. You only pay a small percentage of your balance – usually around 2-3 percent. It takes a long time to eliminate debt a few percentage points at a time. What’s more, if you make new charges each month, it can seem like you never get anywhere.
Interest charges are a big part of the reason you can’t pay off your cards and other balances. If you make minimum payments at 15% APR, roughly one half of each payment covers accrued monthly interest charges. At 20% APR, it jumps to two-thirds of each payment.
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When minimum payments don’t work, you can try paying more. This usually involves implementing a debt reduction plan. You determine how much you can afford to pay and set that as a fixed amount that you pay each month.
Before you consider any other solutions, you should review your budget to see how much money you could allocate for debt elimination. Then you can use the calculator below to determine how quickly you could pay off your balances utilizing this strategy.
Even if you cut your budget down to just necessities, it can take a long time to reduce your debt using this method if your balances are high. If you’re not making the progress you want, then it’s time to find a better way to eliminate your balances.
A certified credit counselor can help you evaluate your best options to eliminate credit card debt.
There are three basic ways to pay off credit card debt faster without causing credit damage or risking your assets. You can:
The right choice depends on your debt, credit, and budget.
This option is best if you have good free cash flow in your budget and a good credit score. You open a new balance transfer credit card at 0% APR. Then you transfer the balances from your existing cards, with a balance transfer fee between 3-5% of the transferred balance.
You have a certain number of months to pay off your debt interest-free. The length of time depends on your credit score and the card issuer; introductory periods typically range from 6 to 18 months.
Here you take out a personal loan for debt consolidation. You qualify based on your credit score and choose a term that offers monthly payments that work for your budget.
Most unsecured loans offer terms of 12-60 months. A shorter term will increase the monthly payments but decrease the total interest charges applied to your debt. A longer term will lower the monthly payment but increase your total costs. You want to choose the shortest term you can comfortably afford to pay to get out of debt as quickly as possible.
For this solution to be as beneficial as possible, you generally want an interest rate that’s no higher than 10 percent.
The money from the loan goes to pay off your balances, leaving only the loan to repay at a lower interest rate.
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If you have too much debt to pay off on your own or a low credit score, you may need help reaching debt-free status. In this case, you can contact a credit counseling agency that comes in and works on your behalf. They help you work out a repayment plan that works for your budget. Then they contact your creditors to arrange for lower interest rates.
You can qualify for a debt management program regardless of your credit score. You make one payment to the agency and they distribute the payment to your creditors as agreed. It’s like an assisted form of debt consolidation without a loan.
Here are a few examples of the results you can see with a debt management program:
Ken from Canton, Georgia was paying over $3,000 every month to cover his credit card bills. But it was barely making a dent in his debt and he wondered if he’d ever pay it all off. With the help of Consolidated Credit, he was able to enroll in a debt management program. His monthly payments were cut by almost 50 percent and Ken saved over $14,000 in total interest charges.
We can help you evaluate all your options and choose the best solution for your needs.
Thank you for submitting your details. A certified credit counselor will be calling you soon at the number you provided.
Consolidated Credit has helped over 10.2 million people find relief from debt. Now we’re here to help you.
Your counselor will help you complete and review your debt and budget analysis, then they’ll discuss the best options for getting you out of debt. If a debt management program is right for you, your counselor can also help you enroll as soon as you’re ready.
If you’d like to speak with a counselor now, please call:
Our office hours are::
Monday - Thursday 8am to 10pm (EST)
Friday 8am to 8pm (EST)
Saturday 9am to 5pm (EST)
Sunday closed
This program has helped my husband and I save so much money and actually get out of debt instead of continuing to make minimum monthly payments! If you’re thinking about trying it, don’t wait any longer! Their customer service is friendly, knowledgeable, and fast to respond and get you answers to your questions and worries.
Melinda of Clearfield, PA
