Smart Steps When You Have Credit Card Debt

A recent report found that unpaid credit card balances grew 9% over the past year, and another survey estimates that many households have had an unpaid credit card balance for at least one year.  

If your financial reality right now includes credit card debt, I want you to hold your head high. And then resolve to take steps to best manage to pay down that debt.

The worst thing you can do when you land in a sticky financial situation is to just give up or resign yourself to a mess you tell yourself is insurmountable. When you feel powerless you are powerless. And I am not going to sit here and tell you that’s okay.

You have the power within you to take more control of the situation. But that requires kicking shame and blame out the door. They aren’t going to help you. When did beating yourself up ever help? C’mon, let’s decide right here and now that this month you will take one step to better manage your credit card debt. Just one. Then next month, keep at it, or add in another debt-reduction strategy.

Here's how to take back some control over your credit card debt.

Call up your credit card issuer and ask for the interest rate to be lowered. 

The average interest rate on credit card balances these days is 22%. Getting it reduced by even a few percentage points is going to help. And you would be surprised how often this works. Besides, it costs you nothing but a few minutes on hold to make the request. 

Review last year’s spending report for needs v. wants.

Many card issuers compile a year-end summary that categorizes your spending. I hope you will take an honest look at whether there were “wants” you charged. Now consider that you are paying 20% or more interest for wants you bought. I think when you go through this exercise it can help you avoid making other unnecessary purchases that will cost you a ton in interest.

Check to see if you qualify for a balance transfer deal. 

Search online for “best credit card balance transfer deals.” That should land you on a page showing card issuers that offer these deals to qualified borrowers. The hurdle to qualifying is typically a strong credit score. But here too, just take the time to apply; the worst that can happen is you are turned down. And maybe you will qualify. 

The best transfer cards right now allow you to move a balance over from a high-rate card and not owe any interest on that balance for 12 to 18 months. That gives you a year or more to work on paying off (or paying down) the debt without being hit with interest charges. There is typically a fee for a balance transfer—it can be 3% or so of the total amount—so this is only a good option if you are ready and able to make a big effort to pay down the debt. A fee of 3% is well worth it if you can wipe out a balance that is charging you 20% or higher interest.  If you expect you will make a big dent in your balance but not get it entirely paid off, you have an extra step: check what the fine print says your interest rate could be after the 0% deal expires. It will typically be a range, based on your credit score. Ideally you want today’s top range to be no worse than what you’re currently paying on your balance.

Find $50 more to put toward your monthly payment. 

I don’t care if you have a $10,000 balance. My challenge is for you to pay more next month than you did this month. Then do it again the following month. And again. I think if you can start making this a habit, you will notice you are motivated to find ways to increase your payments even more.  Don’t look at the balance. Focus on the fact you are limiting your new purchases to absolute needs (no wants!) and you are paying more each month than in the past. That’s making important progress.

Consider a short-term gig. 

I get it if your life is already way too busy. But if there’s the smallest possibility you could add some gig work for 5 to 10 hours a week, what might that generate in extra cash that you could use to pay down your credit card debt? The key is to promise yourself that every after-tax dollar from this side gig will go toward getting out of a credit card debt. This can be an especially powerful money move if you pair it with a balance transfer deal: using income from a temporary side gig to pay down a balance when there is 0% interest being charged is going to help you make a serious dent in what you owe in a short time.