Still Got Credit Card Debt? Here’s How to Reduce It

Credit card debt became a huge topic of discussion over the last few years. Mainly, the credit card industry’s propensity for allotting credit lines to people who genuinely could not afford them caused massive chaos in the industry. This chaos led to cut or eliminated credit limits without notice as well as a dramatic increase in people’s interest rates. Many families could barely make ends meet with all of the rising debt.

Luckily, it seems that many in the nation began to take a real interest and dedication to paying off debts and getting their financial house in order. With credit cards becoming harder to get nowadays, it is wise for people who already have cards to keep them in good standing by paying off balances each month and spending wisely on credit.

For those who still find it a struggle to eliminate credit card debt, there are steps you can still take to find relief. Here is the top tips for paying down plastic debt and eliminating it entirely:

Stop Spending
If you find it too difficult to come up with even the minimum required monthly payment, stop spending immediately. Living on your plastic line of credit is a sure-fire way to stay deep in debt. If you can’t pay for something in cash, don’t buy it. If you are living day to day on credit, seek out a second source of income immediately.

More Than the Minimum
When constructing your monthly budget, make a point to include more than the minimum amounts for credit card accounts. If you begin to expect having to pay more a month through planning, the faster you can pay down the debt. Pay as much extra as you can afford but stick with the commitment to paying more every month, not just when you feel like it. By using this tactic, you can essentially cut years off of your debt payments and improve your credit score at the same time.

Shop for a Better Card
If your credit score is still in good standing but it is getting harder to meet even the minimums, start shopping for a card with lower interest rates. During the recession months, many credit card companies shot cardholder interest rates through the roof. Where once was a 9% rate, there soon was a 25% rate. Now as the industry is trying to rebound, card companies are trying to woo new customers. Check out the many online comparison sites and then transfer your balance to a lower interest card.

Get On the Phone With Creditors
Now that some of the drama in the industry has died down, consider contacting your creditors and ask them for lower rates. They may not want to risk losing you if you have been great about payments in the past. Many will be willing to work with you by renegotiating your card terms.

Find Alternative Sources for Funds
If credit card balances are quickly spiraling out of control, you may need to borrow cash from other resources. Your 401k, life insurance, and savings are all viable sources for cash. You may also investigate a home equity loan to pay off all debts. There are several places you may be able to turn for extra cash, but do so with extreme caution because you can end up losing more than you bargained for by not considering the consequences.

Sued For Credit Card Debt- Now What?

The days of debtor’s prison are in the past, however it is still possible to face legal consequences for unpaid credit card debt. As long as you have not broken any laws (such as knowingly and fraudulently racking up debt you have no intention of repaying) you don’t have to worry about going to jail, but you can be sued. Credit card companies have the right to attempt to receive payment for unpaid credit card debt. In most cases they try every avenue possible before turning to the court system. This means if you have received notification that you are being sued, things have gone from bad to worse in regards to your financial situation. The funny thing about debt is it never goes away. Yes, the statute of limitations may expire or any number of other things that make it appear to disappear, but without dealing with your debt it will always follow you in the future. Once you have been sued for debt, you can no longer pretend it doesn’t exist. Accepting the reality of the situation will likely lead to the following questions.

How do I know if I’ve been sued?

Once your credit card company takes action against you, you will be served a summons from the court. You may receive this summons via a process server, certified mail or even a sheriff’s deputy. After you have been served, you will have the following options: do nothing which will result in a judgment being filed against you, contact your creditor to work out a plan or answer the summons by appearing before a judge.

How do I proceed if I go to Court?

Being summoned to appear before a judge is rarely a pleasant experience, however you should not let fear keep you from dealing with the situation. When you go to Court it is important to speak honestly and directly with the judge. If you truly do not have the money to repay the debt, yet show signs that you are willing to work out a payment plan or some other scenario to rectify the situation, a judge may hold off in setting a legal judgment against you. This will only be successful if you are willing to hold up your end of the bargain, therefore if you are granted the opportunity to make good on your debt, you better do so.

What happens if I choose to ignore the summons?

If you decide to ignore the summons (not advised) or lose your case in court, there will be a legal judgment entered against you. This will result in information being reported to the credit bureaus which will have a negative impact on your credit. Beyond damage to your credit, you might find your wages are garnished or assets are seized as payment for unpaid debt. Since this can go on for years, you should do everything in your power to avoid having a judgment entered against you in the first place.

The best way to avoid this situation is by dealing with your debt before it gets to this point. Most consumers today are all to familiar with financial struggles and although credit card companies are not exactly in your corner, you would be doing yourself a favor by trying to deal with them directly versus in a court of law.

Which Debts Do Not Qualify For Debt Settlement?

Consumers who are considering debt settlement as a form of debt elimination have a lot to consider before committing to the process. There is plenty of information floating around various media outlets either warning people of the dangers associated with debt settlement or the many reasons you should enroll in a program. This conflicting image of the process can leave many people confused as to whether or not debt settlement can help their specific situation.

To better understand if you are a candidate for debt settlement you must first learn as much as possible about this method of debt elimination. The truth of the matter is this; the process can work for qualified individuals however there are no guarantees and there are certain risks you take when using this process to get out of debt. Only those who face a legitimate financial hardship which makes the negative consequences outweigh the potential benefits should consider this process. Before doing so, you must understand that not all debts can be settled through debt negotiations.

The following debts cannot be negotiated through standard debt settlement programs:

• Secured debts- Any debt that is secured such as a mortgage loan or vehicle note cannot be included in the debt settlement process. You can however contact your lender to see if they are willing to work with you to get back on track. Certain lenders offer hardship programs which are designed to help borrowers keep their property and fulfill their loan obligations.

• Student loans- Most student loans will not qualify for standard debt settlement programs. Similar to secured debts you would have to contact your lender to see if you can work out an agreement with them outside of the regular debt settlement process.

• Taxes-The IRS is not going to negotiate with a debt settlement company working on your behalf. With that being said it is sometimes possible to work out an arrangement with the IRS but do not consider this a debt that can be included when considering debt settlement to eliminate your debts.

• Child support and alimony- Child support and alimony are debts that you will have to pay at some point regardless of your financial situation. Debt settlement companies will not include these debts as part of your program.

Knowing what debts qualify can help you make that difficult decision whether debt settlement is right for your situation. This legal process of reducing or eliminating debt is generally reserved for credit card and other unsecured debts. Other debts such as those you see here will have to be handled individually and separately from the rest of your debts.  In order to move forward to a life of financial freedom it is imperative you work out a plan to pay or otherwise take care of all unpaid debt.  Otherwise you will never truly know what it is like to find financial security.

Should I Pay Off Credit Card Debt with Home Equity?

When consumers get backed into a corner financially, they begin to look for ways out.  It is not a bad thing to examine all of your options.  In that examination process, you need to consider the consequences of your choices.

In some cases, it might make sense to pay off your credit card debt with a home equity line of credit.  Here’s why:

Lower Interest Rates.  By lowering your rate, you can apply more of your payments to the principle so that you can pay off the loan sooner.

Stop the Snowball Charges on Your Credit Card Accounts.  Fees and other charges are likely adding up on your account every month and every time you look at them your heart sinks.

One Monthly Payment.  Consolidating your credit cards in this manner helps you manage your money easier by making only one payment to one place every month instead of to multiple accounts.

Those are the reasons that it makes sense to pursue this as a financial step to getting back on your feet.  However, there are consequences to doing this and you need to understand what can happen as a result of your actions.

Credit Cards Build Up Again.  If you keep using your credit cards after you have paid them off, you will eventually find yourself in the same position only now you will have a huge home equity loan balance, too.

Home Equity Becomes Like a Credit Card.  You start to use your home equity line like a credit card for frivolous purchases of things you really do not need.

Here is how to prevent these unintended consequences:

Close Your Credit Card Accounts.  Get rid of the cards by cutting them up into pieces.  Change your mind about credit and how you use it.

Do Not Use your Home Equity for Purchases.  As mentioned, stay away from using the home equity line of credit to make purchases.  Concentrate on paying off the home equity line as soon as you can.

Live Under Your Income Level.  Create a budget and live under it.  Make it a lifestyle change so that you do not find yourself in the same situation again.

What this question really comes down to is your attitude towards finances.  The fact that you have used your credit cards in a way that has caused you to pile up a large amount of unsecured debt reveals that you probably need some help with money management.  Find a good source of help before you take steps to relieve your debt problems.  There are great resources all over the Internet that can help you be a better money manager.  Using the advice that you hear, you can become debt-free and in control of your money.  And that is goal anyway, is it not?

Three Keys To Reducing Credit Card Debt

There are plenty of new and improved services that are available to help you reduce and even completely eliminate credit card debt. But what all of it really boils down to initially is that getting out from under credit card debt requires a debtor to turn three simple keys to start the ball rolling.

Here are 3 keys to reducing your credit card debt, no matter how deep you are in debt:

Track and Budget
If you are just now getting on track with managing your personal finances, the only place to start is with a budget and expense tracking sheet. For at least one month, you need to keep a notebook and pen with you at all times to record each and every penny you spend. Whether you are buying a coffee at the corner store or a cart full of groceries, you need to be writing it all down for 30 days. At the end of the month, sit down with all of your monthly bills and financial obligations, plenty of room, a calculator, a notebook, and a ledger tablet.

Start by categorizing each expense you put out using terms such as entertainment, food, child care, and miscellaneous. Go back down through the list and total each category. After recovering from the shock of where your money is going in thirty days, you’ll next need to write down your income for the month and tally your bills for the month. If there are more expenses than income, head back to the expense tracking sheet and see where you can start making cuts. Keep cutting until you have enough extra cash leftover after paying all of the bills. With a budget, you will know how much cash you have to spend each month on entertainment, groceries, clothing, etc, lessening the occurrence of overspending.

Prioritize Your Finances
Along with establishing a budget, you also need to start setting financial goals, both short and long-term. If you have a lot of credit card debt to tackle, you may consider getting a temporary second job and devote those paychecks only to the credit card bills. Sketch out a financial plan that can add a time line to the amount of time it will take to pay off debts in full. By sticking to a budget and following strict guidelines that you yourself creates, you should be able to implement a financial plan that works for your lifestyle and eventually will expand to include savings plans and goals.

The Drive To Be Debt Free
Like with many bad habits, you have to want to quit the bad and replace with the good. Overspending on credit is a definite bad habit that leads to debt issues and poor financial planning. You have to want to be debt-free and willing to make the changes necessary to get back on financial track. You have to be committed to stick it out with a budget plan, even when the going gets stuff. Seeing the big picture is what you need to be looking at when it comes to personal financial management and the ability to live a debt free, financially stable life.

Finding Relief From Credit Card Debts

It can be all too easy to get into unmanageable credit card debts but unfortunately most people who find themselves with credit card problems is due to the fact that people continue to live above their means, spending more money than they can afford. When cash is unaccessible, consumers will continue to charge purchases or withdraw cash against their credit cards with little thought or planning for how to pay off the balances. When payments to credit card companies become impossibly hard to meet each month and balances get carried over with fees and penalties, credit scores plummet and consumers are left struggling to deal with their debts. Dealing for some means ignoring the creditors and bill collectors and falling farther into debt.

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