Credit Card Debt: How to Manage Your Debt | United Debt Settlement (2024)

Credit card debt has become a way of life for a significant percentage of the American population. As of September 2017, 38% of American households carried some variety of credit card debt, with balance-carrying households averaging a credit card debt level exceeding $16,000.

In fact, total revolving debt in the United States now stands at just over one billion dollars! Though initially designed to serve as a convenience to the American consumer, credit cards unfortunately are often misused in a manner that eventually leads many down the road of financial difficulty.

The Many Different Types of Credit Cards

Traditional credit cards such asCredit Card Debt: How to Manage Your Debt | United Debt Settlement (1) are widely accepted and commonly utilized to charge everyday expenditures. Rewards cards have become quite common, offering benefits including cash back, airline miles, and points that can be exchanged for hotel stays, gift cards and other useful perks.

For those who travel often and/or tend to spend a bit more, premium rewards cards offering the possibility of free airline tickets and admission to airport lounges can make sense despite the significant annual fees that may come attached to them. Meantime, balance transfer cards have long been in vogue, given the low interest rate advantages offered to those seeking credit card debt consolidation from higher interest rate credit card debt.

There are also other niche credit cards such as retail cards issued by specific chain stores that can be used exclusively at the store chain issuing the card, and gas cards that offer discounts on a particular brand of gasoline or provide cash back when particular spending milestones are reached.

Do You Qualify For Debt Relief?

Get Started By Selecting Your
Debt Amount

The Silent Killer of Credit Card Debt

On a fundamental level, a credit card functions as a personal loan to the consumer that is best paid off in full at the end of each billing cycle. This is where most people go wrong – at the outset. Far too commonly, credit card charges are not quickly paid off in full, resulting in them contributing to an ever-expanding pile of revolving debt that is continually subject to high interest rates ranging from 12-25%, or higher.

The problem of credit card debt is an insidious one, as it can mushroom almost invisibly to the afflicted. It is not uncommon for a pattern of behavior to emerge that includes somewhat indiscriminate spending habits accompanied by minimum payments made against a growing pile of credit card debt. Yet, life goes on. Bills are paid, necessities remain affordable and provided for, things feel generally under control.

Slowly but surely, however, a credit card debt problem is evolving. Over time, thousands of dollars in interest expense can go to waste, with revolving debt placing an ever-tightening choke hold on the financial well-being of the debtor. From a credit score impact, the higher the level of debt utilization – that is, the percentage of available credit actually borrowed – the greater the negative impact on a credit score.

Take Action of your Credit Card Debt

There are ways to interrupt this pattern, not the least of which is to simply take a pair of scissors to your credit cards. This may seem like an overly simplistic solution – but it does work for some – and in terms of preserving your credit score, it is a far better option than closing out credit card accounts.

It is important to know that your credit score will drop after closing any credit card accounts. Next, It is always a good idea to devise a monthly budget that can serve as a foundation for your financial well-being. Get a clear picture of your monthly after-tax income and carefully account for all expenses against that income. You should clearly write down how much money you require each month for housing, food, transportation, utility bills and other necessities.

Think in terms of using credit cards mostly for emergencies, not for extravagances. If changing your spending habits sounds like a difficult proposition, consider seeking help from an accredited credit counseling agency that can educate you while putting you on the right track financially. If your credit card debt has become unmanageable given your budget and circ*mstances, speak with a skilled and reputable credit counselor about enrolling in a debt management plan (DMP).

In a DMP, you can streamline multiple monthly credit card payments into one simple lower payment to a counseling agency who negotiates lower interest rates and payments with your creditors.

Credit Card Debt: How to Manage Your Debt | United Debt Settlement (4)

How Debit Cards Differ from Credit Cards

When a consumer uses a credit card, they’re borrowing money to make a purchase. However, when someone uses a debit card, they’re really just spending money that already resides in a bank account. From a debt accumulation and interest expense standpoint, debit cards are obviously better than credit cards.

With a debit card, money for expenditures is deducted from the associated bank account with the issuing bank sometimes charging a transaction fee. In the event a bank account gets depleted to zero, any subsequent debit card charges will be declined until the bank account is replenished.

Credit cards accumulate balances and carry over revolving debt from previous billing cycles that lead to monthly bills with due dates and minimum required payments. When a credit card balance reaches its designated credit limit, any attempted purchases will be declined, but the monthly bills will keep on coming.

There are some advantages that credit cards possess over debit cards related to security and rewards programs. If your credit card is suddenly used without your authorization, you will not be held responsible, provided you report the situation to your bank. With debit cards, security can be more of an issue – as a would-be thief can potentially drain all of the money from your bank account.

If you become the victim of debit card fraud, you will have to dispute any unauthorized debits and your bank account funds can be restricted for the amount in question while it takes to resolve the dispute.

You must report unauthorized debits within two business days, otherwise you could be held liable for the first $500 lost – even though you’ve been a victim of debit card fraud. Debit cards also rarely offer the quality of rewards programs that often come with credit cards.

Related to: Credit card debt

  • Too much credit card debt? 5 warning signs
  • How to improve your credit score
  • Credit and loan plans
  • Credit card relief
  • Credit card guidance
  • Credit card interest rates
  • Solving your credit card debt problem

Credit Card Debt

Are you in debt? we can help

How Credit Cards Function

With such a wide variety of credit cards offering so many different features and rewards, it makes sense to conduct some research online to find the best card suited to your needs. Consider how you plan to use the card, whether you plan to carry over balances each month, and the types of rewards in which you may be interested. Be crystal clear as to interest rate charges and fees. After you are approved, the bank will mail the card along documentation related to interest rates and available credit line, factors determined based on your credit score and profile.

After you have activated the card over the phone, it will be ready for use. It is impossible to overemphasize the importance of being prudent with your credit cards, reserving them for emergencies and special situations only. Never exceed your credit limit, as this can result in higher interest rates and fees while causing damage to your credit score. Additionally, always pay your bill on time, as late or non-payment will also result in fees and damage to your credit score.

Review your monthly statement carefully to ensure that there is no fraud. If you do spot an unauthorized charge, call the credit card fraud department immediately and report it. Short of that, pay your bill in a timely manner, and for as close to the full balance as you can afford. This is one reason why it is so important to have a written budget of your monthly income and expenses, as the last thing you want to do is fall into the habit of accumulating revolving credit card debt while paying only the monthly minimum (or close to it) on your cards.

Revolving debt leads to revolving interest expense, a vicious cycle that often keeps people in credit card debt for years while thousands of dollars in interest expense are wasted.

Credit Card Debt: How to Manage Your Debt | United Debt Settlement (5)

Bad Credit Card Debt Habits to Avoid

We’ve already mentioned the importance of attempting to pay off balances in full each month, and the good news is that roughly half of all credit card holders do just that. But that still leaves the “half-empty” part of the glass to talk about. And if that’s where you find yourself, then make absolutely certain that you make every effort not to engage in the dangerous activity of building high revolving credit card debt balances by paying significantly more than the minimum payment each month, in accordance with your written budget.

Do not get into the habit of taking cash advances off your credit cards, as these usually come with excessively high interest rates. Watch your impulse buys and closely monitor your spending behavior. Never exceed your credit line, and don’t apply for additional cards because you’re close to maxing out your credit line on an existing card.

Bad habits creep up on us over time, by definition, behaviors associated with them are never a one-time event. When you find yourself spending too often on things you truly don’t need, have the courage to acknowledge your bad behavior and the self-discipline to abruptly slap on the brakes. Again, if this is too difficult, get help from a skilled and reputable credit counseling agency.

Credit Card Debt: How to Manage Your Debt | United Debt Settlement (6)

If You’ve Got a Credit Card Debt Problem, Proactively Solve It

If you’ve fallen into the habit of living beyond your means through a misuse of credit cards, there are a number of steps you can take to remedy the situation. There are two sides to this that you can work on – either earn more, or spend less. For starters, you may not have given much thought to taking on a second, part-time job with flexible evening and weekend hours. Restaurants, retailers and other service businesses are viable candidates for earning extra income in this regard. Next, you must be willing to alter the spending habits that led you into this predicament in the first place. When it comes to spending less, cut out restaurant meals in favor of eating at home more often, stop purchasing high-end clothes, and go easy on expensive sporting events and entertainment. One simple rule to consider living by – if you can’t afford the purchase with your debit card or the cash in your pocket – don’t buy it!

Getting out from under a significant amount of credit card debt requires commitment, sacrifice and thoughtful planning. Be realistic as to the time frame involved, and be willing to commit to a 3- to 5-year course of action. Always pay on time, and pay as much of your balances as your monthly budget will allow. However, if even after your best efforts, you still find yourself burdened by an onerous amount of revolving credit card debt, the best option very well may involve you working alongside a skilled credit counselor from a reputable credit counseling agency who will tailor an appropriate debt management plan specific to your situation.

Credit Card Debt FAQ

How can I rebuild my credit if no one will give me a credit card?

You may want to consider applying for a secured VISA credit card, one in which you deposit money into a savings account and the card is then used for purchases up to the amount of your deposit. This is an excellent way to begin the process of rebuilding your credit.

A credit card account from fifteen years ago is displayed on my credit report. Are accounts supposed to stay on my credit report for this long?

If you look closely at your credit report, you’ll likely find that credit card account activity from more than ten years ago actually reflects a positive item – namely that you paid your bills on time. Negative items – such as missed payments and late fees – will remain for seven years, while bankruptcies and judgments remain for ten years. If you discover negative items on your credit report that extend beyond these time frames, contact the credit reporting agency that issued the report and dispute the error.

What is credit counseling?

Credit Counseling is a wise option for those who need help getting back on track financially. A skilled, certified credit counselor from a reputable agency will conduct an initial 30-45 minute telephone interview related to your income, expenses and debt levels, before making a determination as to what may be the best solution for your specific financial situation. Common solutions including enrolling in a debt management plan, taking out a debt consolidation loan or pursuing debt settlement.

I am recently divorced. Should I take any steps to protect my credit profile?

If you and your former spouse opened any joint credit card accounts or other credit lines – including mortgages and auto loans – then you’ve got to stay on top of these situations. Contact each creditor to determine whether you can convert joint accounts into individual accounts, and make every effort possible to remove your former spouse as an authorized user from any credit card accounts that bear your name.

How much credit card debt is too much?

There isn’t a number to assign to the answer of this question – but rather it is a matter of how you are managing your debt level, the amounts you are paying off each month, and whether you have been using credit cards for extravagances and unnecessary experiences that are truly beyond your means. If you’re paying only the minimum monthly payments, that’s a sign that you’ve got too much credit card debt and insufficient amounts of disposable cash to pay off what is often high interest rate (12-20% or higher) credit card debt. If you’re using one card to pay off another card (exclusive of low-interest rate balance transfer promotions), that’s another sign that you’ve got too much credit card debt. If you’re buying things on credit that you cannot afford to purchase for cash, that’s another sign that you’ve got a bad credit card spending habit in place and have too much credit card debt. Other signs that you have too much credit card debt include when you are denied additional credit when you apply, and when your card(s) “don’t work” at the point of purchase – because the credit lines associated with them are already close to “maxed out.”

What happens to unpaid credit card debt after 7 years?

Unpaid or delinquent credit card debt will fall off a credit report after seven years – but this does not extinguish the debt liability itself. Only the debtor’s particular state statute of limitations as it pertains to credit card debt can restrict the creditor (or collection agency) from pursuing debt collection after a sufficient period of time elapses. However, statute of limitations on credit card debt collection will vary considerably from state to state, the seven year mark is only relevant when it comes to unpaid debt no longer appearing on a credit report. State statutes of limitations related to credit card debt collection are often shorter than seven years (they typically range from three to six years), but are occasionally as long as ten years.

How to consolidate credit card debt without hurting your credit?

Consolidating credit card debt without hurting a credit score is a relatively straightforward process. A debt consolidation loan, such as a personal installment loan – or even a promotional low-interest rate credit card balance transfer – consolidates multiple debts into one single loan, typically resulting in a lower interest rate and monthly payment. Debt consolidation loans streamline the repayment process while simultaneously lowering interest expense and the total amount repaid over time.

What happens if you don't pay credit card debt?

Negative consequences result almost immediately following a missed credit card payment. Late fees, an increase in the required minimum monthly payment, followed by penalty APR after 60 days of missed payments – your interest rate can quickly go as high as 29.9%! Interest expense mounts, things get expensive in a hurry, and your credit card billing department will contact you with increasing frequency via phone, text and email. Your credit score gets impacted negatively as the three major credit bureaus (Experian, Equifax and TransUnion) are notified of your delinquency at the 30, 60, 90, 120 and 180-day hallmarks. After 180 days, your credit card issuer will charge-off your account (write it off as a loss) and sell it to a collections agency, who will begin their own steady pursuit of you and the debt. Meantime, since your debt is now over 180 days delinquent, your credit report will bear the stain for seven years, holding back your credit score further.

Trustpilot

Credit Card Debt: How to Manage Your Debt | United Debt Settlement (2024)

FAQs

What is the average settlement for credit card debt? ›

But that's not really the case. According to the American Fair Credit Council, the average settlement amount is 48% of the balance owed. So yes, if you owed a dollar, you'd get out of debt for fifty cents.

Is it worth settling credit card debt? ›

Debt settlement can eliminate outstanding obligations, but it can negatively impact your credit score. Stronger credit scores may be more significantly impacted by a debt settlement. The best type of debt to settle is a single large obligation that is one to three years past due.

How do I clear my debt in settlement? ›

Debt settlement involves offering a lump-sum payment to a creditor in exchange for a portion of your debt being forgiven. You can attempt to settle debts on your own or hire a debt settlement company to assist you. Typical debt settlement offers range from 10% to 50% of the amount you owe.

How do I clear my credit card settlement? ›

If any consumer with a credit card cannot make the total payment owed, they can contact the respective bank and indicate why they cannot pay the entire amount. They can then negotiate on the amount and reduce the outstanding balance to be cleared. This is known as credit card settlement.

Can I still use my credit card after debt settlement? ›

The short answer is Yes, people are generally allowed to use their credit cards after debt consolidation as it does not typically involve closing credit card accounts.

Can I negotiate debt settlement yourself? ›

Debt settlement is best done directly by talking with your creditors yourself. You would typically offer the creditor a small lump payment.

What is the disadvantage of credit card settlement? ›

Pros of debt settlement programs include speeding up the repayment process, reducing the total amount owed, and avoiding lawsuits. Cons involve a negative impact on credit score, accumulation of late fees and interest charges, and results that can't be guaranteed.

What is the lowest a credit card company will settle for? ›

What percentage will credit card companies settle for? Credit card companies may settle for anywhere from 10% to 50% of the amount owed. It depends on several factors, including the credit card company and how delinquent the balance is.

How long to rebuild credit after debt settlement? ›

Your credit score will usually take between 6-24 months to improve. It depends on how poor your credit score is after debt settlement. Some individuals have testified that their application for a mortgage was approved after three months of debt settlement.

How to stop paying credit cards legally? ›

When you file for Chapter 7 bankruptcy, commonly known as liquidation bankruptcy, your assets above certain exempt amounts are sold off to repay as much of your debt as possible. Any remaining unsecured debts, like credit cards, are then discharged, meaning you are no longer legally obligated to pay them.

Why is my settlement figure so high? ›

The settlement figure is the amount you owe on your car finance, but might also include extra charges for things like admin as well as early settlement fees. This settlement fee is usually valid for 28 days, and any extra payments you make in the meantime will affect this figure.

How to pay off credit card debt when you have no money? ›

  1. Using a balance transfer credit card. ...
  2. Consolidating debt with a personal loan. ...
  3. Borrowing money from family or friends. ...
  4. Paying off high-interest debt first. ...
  5. Paying off the smallest balance first. ...
  6. Bottom line.
Apr 24, 2024

Can I get a loan after credit card settlement? ›

Settling a Credit Card debt can be a relief, but it might leave a lingering mark on your CIBIL score. A 'settled' status signals to lenders that you weren't able to repay the full amount due. This can impact your ability to obtain loans or credit in the future at competitive rates.

Is settling a Credit Card debt bad? ›

Settling a debt will generally help your credit a little, although not as much as paying your bills in full. However, if you intentionally stop making payments on an account that's current or only slightly past due, that could significantly hurt your credit scores in the meantime.

What is the average percentage for a credit card settlement? ›

The Role of Debt Settlement Companies

Debt settlement companies negotiate with your creditors on your behalf for a cost, usually between 15-25% of the total outstanding debt. Remember: while a debt relief company offers assistance with negotiations, their services aren't free.

What is a reasonable settlement offer for debt? ›

Once you've done your research and put aside some cash, it's time to determine what your settlement offer will be. Typically, a creditor will agree to accept 40% to 50% of the debt you owe, although it could be as much as 80%, depending on whether you're dealing with a debt collector or the original creditor.

What is the maximum percentage of credit card settlement? ›

What percentage of the credit card bill can be settled? No fixed rule specifies the credit card settlement percentage. It depends on the analysis done by the card issuer. The card issuer may also reject the application and take the customer to a court of law.

How much will creditors accept as settlement? ›

Depending on how much you owe, your current monthly contributions towards the debt, and the length of time the debt has been held for, you may be able to negotiate a settlement figure of around 30% of the total amount owed. However, some creditors will take a much harsher view and will expect a figure closer to 70%.

What are typical debt settlement fees? ›

Service fees are based on a percentage of the enrolled debt amount that the company successfully settles on your behalf. They usually range from 15% to 25% of the total enrolled debt or the settled debt amount, although some companies charge up to 35%.

Top Articles
Zucchetto or Skull Cap | EWTN
What is Federated Identity Management (FIM)? How does it work?
This website is unavailable in your location. – WSB-TV Channel 2 - Atlanta
His Lost Lycan Luna Chapter 5
Missing 2023 Showtimes Near Cinemark West Springfield 15 And Xd
Jonathon Kinchen Net Worth
Nfr Daysheet
Byrn Funeral Home Mayfield Kentucky Obituaries
Shorthand: The Write Way to Speed Up Communication
877-668-5260 | 18776685260 - Robocaller Warning!
Dr Lisa Jones Dvm Married
Fallout 4 Pipboy Upgrades
Rls Elizabeth Nj
Progressbook Brunswick
Valentina Gonzalez Leaked Videos And Images - EroThots
Mid90S Common Sense Media
Binghamton Ny Cars Craigslist
24 Hour Walmart Detroit Mi
5 high school volleyball stars of the week: Sept. 17 edition
Velocity. The Revolutionary Way to Measure in Scrum
Willam Belli's Husband
Zalog Forum
Forum Phun Extra
CVS Near Me | Columbus, NE
Air Quality Index Endicott Ny
Sec Baseball Tournament Score
Surplus property Definition: 397 Samples | Law Insider
Reicks View Farms Grain Bids
Wiseloan Login
Pokemon Inflamed Red Cheats
Ordensfrau: Der Tod ist die Geburt in ein Leben bei Gott
Spirited Showtimes Near Marcus Twin Creek Cinema
Craigs List Jax Fl
Delta Rastrear Vuelo
Human Unitec International Inc (HMNU) Stock Price History Chart & Technical Analysis Graph - TipRanks.com
1987 Monte Carlo Ss For Sale Craigslist
Texas Baseball Officially Releases 2023 Schedule
Aliciabibs
Puffco Peak 3 Red Flashes
Sept Month Weather
Ferguson Employee Pipeline
Mid America Irish Dance Voy
Jack In The Box Menu 2022
Wunderground Orlando
Busted Newspaper Mcpherson Kansas
Walgreens On Secor And Alexis
Caphras Calculator
Identogo Manahawkin
Diamond Desires Nyc
Blippi Park Carlsbad
Latest Posts
Article information

Author: Rev. Porsche Oberbrunner

Last Updated:

Views: 5626

Rating: 4.2 / 5 (73 voted)

Reviews: 88% of readers found this page helpful

Author information

Name: Rev. Porsche Oberbrunner

Birthday: 1994-06-25

Address: Suite 153 582 Lubowitz Walks, Port Alfredoborough, IN 72879-2838

Phone: +128413562823324

Job: IT Strategist

Hobby: Video gaming, Basketball, Web surfing, Book restoration, Jogging, Shooting, Fishing

Introduction: My name is Rev. Porsche Oberbrunner, I am a zany, graceful, talented, witty, determined, shiny, enchanting person who loves writing and wants to share my knowledge and understanding with you.