Having multiple credit cards has become an American way of life, and it’s not necessarily bad – if you can pay off the balance each month. Unfortunately, too many of us use credit cards to keep pace with increased living costs, and since credit cards are one of the most expensive ways to borrow, we wind up unable to pay off our debts.
According to the American Bankers Association, 43 percent of card holders carry a balance each month, and the Federal Reserve reports that outstanding card debt hit a record $1.023 trillion in November 2017. Rising credit card debt is a leading reason why Americans get into a financial hole.
The skilled and seasoned Ohio bankruptcy attorneys at Fesenmyer Cousino Weinzimmer understand that even the most well-intentioned people can find themselves overwhelmed with debt. We offer a free consultation to evaluate your financial situation by looking at your debts, your income, and your goals and coming up with a debt-relief plan that’s best for you. Call one of our conveniently located office branches or contact us online for your free consultation.
Ways to Tackle Credit Card Debt
The worst way to deal with credit card debt is to pay off just the minimum balance each month. With many credit card interest rates at 16 percent or more, you can wind up taking decades to pay off your cards, or never paying them off at all. This is because the minimum payment hardly makes a dent in your principal, and as the balance goes down, the minimum payment gets lower and your payoff time stretches out longer.
Instead, consider one of the following methods that do help pay off your cards:
1) Snowball Method
The “snowball” method is to pay off the debt on your low-balance cards first, while paying the minimum on the other cards. Once you pay off your lowest balance card, you tackle the card with the next-lowest balance. The advantage is that seeing some card balances paid off helps motivate you to tackle the bigger balances on other cards.
For this to work, you need to come up with an amount you can afford which is higher than the minimum and continue to pay this set amount each month. As the difference between what you are paying and the minimum card payments grows, more of your payment will be going to principal and paying off your debt.
The downside of the snowball method is that if your lowest balance cards don’t have the highest rates, you will wind up paying more in interest over time.
2) Avalanche Method
The “avalanche” method focuses on paying off the card with the highest interest rate first. You still pay the minimum on your other cards, but the amount you can afford to pay above the minimum is applied to the credit card debt with the highest interest rate. This reduces the total interest paid and the time it takes to get out of debt. The downside is that it could take longer to see results, and some people may get discouraged, especially if the highest interest card has the highest balance and takes a long time to pay off. However, the total amount saved can be substantial if your interest rates differ significantly and the higher rates are on the cards with the largest balances.
To see just what the difference is between the Debt Snowball and Debt Avalanche methods, you can use this free calculator.
3) 0% Balance Transfers
There’s one aspect of the Debt Snowball versus Debt Avalanche debate that’s often missed. It’s the important step of lowering the interest rates on your debt. In the case of credit cards, 0% balance transfer offers this article is from 2015 and the information is outdated. Please take out hyperlink. can bring your rate to zero. At that point, the order in which you pay off your debt is inconsequential.
Balance transfer offers are not always a complete solution. For starters, you need a good credit score to qualify for the best offers. Even if you do qualify, you may not get the credit limit required to transfer all of your credit card debt. Applying for multiple 0% offers is one strategy, although, it can be a hassle to manage multiple cards. It’s important to pursue any reasonable options available to lower your interest rate.
With your rates as low as possible, either the Debt Snowball or Debt Avalanche strategy will significantly shorten the time it will take to pay off your credit card debt.
Hints for Dealing With Credit Cards
- Be Careful About Closing Cards – Do not close paid off cards too fast, as this could lower your credit score. Keeping your oldest cards active gives you a longer credit history, which can help your credit score.
- Avoid Further Debt — Consider what purchases are really necessary and determine why you are getting into debt. If you are living beyond your means, adjust your lifestyle by trimming expenses or increasing your income or both. Don’t make new credit card purchases until you pay off your current balances.
If you have taken these steps and still find yourself unable to handle credit card debt, you may want to consider the fresh start available by filing for bankruptcy. Bankruptcy is a legal way to have many debts forgiven. The most common types are Chapter 7 and Chapter 13. Chapter 7 is a full liquidation of all assets that will eliminate many debts, including those for credit cards. Chapter 13 may allow you to keep property, such as a mortgaged house, while you complete a three- to five-year affordable payment plan to have debts forgiven.
Contact Us and Get Help
If debt is something you can no longer handle, take the first step toward relief by contacting the seasoned and compassionate Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer. We offer a free initial consultation to evaluate your entire financial situation and determine the best fit for your circumstances. We will make sure you are aware of all your options and help you decide on the path to a brighter future that makes sense in your individual case. We will walk you through the process every step of the way.
Delaying can only worsen your situation, so call one of our conveniently located office branches or email for your free consultation so we can determine what debt relief solutions will work best for you.