Credit card debt is often accompanied by other serious debt problems. The two best options to get help with credit card bills and get out of debt involve filing bankruptcy. Chapter 7 Bankruptcy is the only option to eliminate debt completely. This includes credit card debt, payday loans, personal loans, medical bills, etc. Chapter 13 bankruptcy is an interest-free debt reduction and repayment plan over three to five-years. Both legal options stop creditors and get you back on track with a fresh start.
There are many reasons why people turn to credit cards. During the pandemic, credit cards provided a safe way to make purchases online. One of the biggest credit card incentives today is the promise of “reward” such as cash back, gift cards or mileage points. The caveat is that credit card balances must be paid in full before each new billing cycle. Because credit card usage requires a fair amount of budgeting and planning, they may not be beneficial for everyone. Those who get behind often find themselves in financial trouble down the road.
Paying the minimum amount due on your billing statement may avoid late fees and calls from the creditor. However, because you end up paying daily interest on the remaining balance, minimum payments won’t effectively address the total debt. According to CreditCards.com, the average credit card interest rate is 16.6%. Compounding interest builds each day for every credit card that has an over-due balance. The cycle continues and the interest builds, even when minimum payments are consistent. For many people, this is the beginning of a debt cycle that becomes nearly impossible to resolve on their own.
Once behind on credit card payments, there is little forgiveness on behalf of creditors. If the due date and/or grace period have recently passed, call them for full payment as soon as possible. If multiple payments have been missed, or if you’re making minimum payments for months or years, there is a bigger financial problem to address. It may be tempting to do a high-interest consolidation or payday loan or to transfer credit card debt from one card to another. These choices ultimately lead to more debt. At Debt Advisors, we have seen these scenarios play out.
Contact Debt Advisors today for a free consultation, and help charting out a clear path forward.