How to Get Out of Debt

Find the debt solution that's right for you.

What Are Common Causes of Excessive Credit Card Debt?

In a perfect world, everyone who uses credit cards would pay off the balance every month. Unfortunately, that’s not the way it works. Most people who use credit cards carry balances from month-to-month. Eventually, those balances can balloon out of control and turn into overwhelming credit card debt. Some common reasons people end up with too much credit card debt include using credit cards to pay for:

  • Medical debt
  • Everyday living expenses
  • Luxury items
  • Impulse shopping

When Does Credit Card Debt Become a Problem?

Calls and letters from debt collectors are obvious signs that you need help with credit card debt. But sometimes it can be harder to tell when credit card debt is a problem. Just because you are paying your bills each month doesn’t mean you’re managing your debt effectively. Signs you may need help to get out of credit card debt are:

  •   Maxing out credit card balances
  •   Asking for credit limit increases
  •   Paying only the minimum payments on your cards each month
  •   Making payments late or skipping them altogether
  •   Discovering you have no money left once all the bills are paid

Additionally, if paying credit card bills is keeping you from working toward other financial milestones, such as saving for retirement, you’ll want to do all you can to get out of debt faster.

Bankruptcy is not the Only Way to Get Out of Credit Card Debt!

While bankruptcy is one way to get out of credit card debt, it is not the only way. And for most people, it’s not the best way, because declaring bankruptcy can greatly limit your financial options for the next several years.

For many, a better option is to work toward eliminating credit card debt on their own, or working with a nonprofit agency that offers credit counseling and debt management plans.

Let’s take a look at all those options, starting with getting out of credit card debt on your own.

How to Pay off Credit Card Debt On Your Own

If you want to try to pay off credit card debt on your own, our free credit counseling is a great place to start. You’ll receive a credit summary that breaks down your total debt, plus a personalized budget to help you manage your finances. You’ll also receive a recommendation for the most efficient way to pay off your credit card debt. If you still decide to proceed on your own after free credit counseling, follow these steps:

Stop using credit cards.

The first thing you need to do if you’re serious about getting out of debt is to stop using credit cards. Take them out of your wallet, cut them up or freeze them in a block of ice; don’t save your credit card information with online retailers, either. In short, do whatever you have to do overcome the temptation to ‘charge it.’

TCA Tip: Designate one credit card for emergencies; but don’t carry it with you.

Figure out exactly what you owe.

Gather your creditor statements and total all your balances and monthly payments. This gives you a clear picture of what you owe and what you need to pay each month on your credit card balances.

Use our Credit Card Payoff Calculator  to estimate how long it will take you to pay off your debt.

TCA Tip: Use any unexpected income – like a work bonus, tax refund, or cash gifts – to pay down debt.

Balance your budget.

Update a monthly budget with your current income, credit card payments and other monthly expenses. Review all your expenses and reduce them where you can with the goal of freeing up income to pay back your debt as quickly as possible. This may also mean finding ways to increase income to make your budget work. Popular ways to bring in extra money to pay off debt include:

  • Getting a part-time job or doing freelance work
  • Selling unused assets such as jewelry, collectibles or sports equipment
  • Requesting a salary increase from your current employer

Use our Monthly/Yearly Expenses Calculator to figure your living expenses.

Negotiate with creditors to reduce interest rates.

It may be possible to work with your creditors directly to request lower interest rates on your credit cards. Lower interest rates allow more of your payment to go toward paying off the principal balance.

If lower interest rates aren’t an option, some creditors offer temporary hardship plans. Unfortunately, these creditor-direct plans only last a few months, which means you can face the same problems with fees and high interest once the plan expires.

Credit Card Payoff Strategies

The Avalanche

With this credit card payoff method, you make at least the minimum payment on every card each month. Then, you dedicate as many extra funds as possible toward the creditor with the highest interest rate until it’s paid off. Then you follow the same strategy for the next highest interest rate and on down the line.

The Snowball

With this credit card payoff strategy, you pay off the credit card with the lowest balance first, then take the funds from that payment and apply them to the next card until it’s paid off. This eventually leaves you with a significant chunk of money each month to dedicate to to your highest balance. The snowball credit card payoff strategy is a great method to try if you need to see consistent success to stay motivated in getting out of debt.

Learn more about Negotiating with Your Creditors

See more Credit Card Payoff Strategies

Get Nonprofit Debt Help with Credit Cards

Working toward getting out debt on your own can be frustrating and time-consuming. If you’d like an easier way, nonprofit credit counseling from Take Charge America is a great first step to help you get out of credit card debt. Working one-on-one with a certified credit counselor or completing our self-directed online credit counseling, you will:

  • Review your income, expenses and debts
  • Create a workable budget
  • Receive a recommended solution to get out of debt
  • Learn how to save for the future

Don’t hesitate to seek help for credit card debt. Our counselors are compassionate professionals and all your information remains confidential.

Struggling on your own or ignoring credit card debt issues will only make them worse. The sooner you ask for help with credit card debt, the sooner you can start living a more peaceful life and begin creating a more stable financial future.

Get started with a free financial review using our complimentary online financial assessment.

Or call now to talk with a Take Charge America credit counselor  — 866.528.0588

Debt Management Plans Help Pay Off Credit Card Debt

Many clients who go through credit counseling receive the option of going on a debt management plan. These are plans designed to help you pay off credit card debt in five years or less. Your credit counseling agency works with your creditors to get lower interest rates, so more of your payment can go toward the principal each month.

Plus, a debt management plan makes your life easier by allowing you to make one payment to your credit counseling agency per month, rather than trying to keep up with multiple credit card payments. You will also receive additional financial education throughout your time on a debt management plan, to help you save money and get ready for a future free of credit card debt.

And if you have reached the point where you have past-due accounts and creditors or collection agencies are calling, a debt management plan can put an end to those calls. Plus, it can stop creditors from charging late and over-limit fees and put past-due accounts on a path to bring them current.

Debt Management vs. Debt Settlement, Credit Repair or Debt Consolidation

It’s easy to confuse nonprofit debt management plans with other debt solutions, such as debt settlement, credit repair and debt consolidation. They are all different processes that have varying effects on your credit and financial future. Additionally, these services are offered by for-profit companies, who may not make their clients’ best interests a top priority.

Debt Settlement – Although they sound similar, debt settlement and debt management are not the same thing. Debt settlement involves paying only a portion of the total balance due, and typically is not an option unless a credit card account is more than 90 days past due. At this point, it’s already damaged your credit. And settling a debt rather than paying in full can have a further negative effect. Additionally, you may be responsible to pay taxes on the settled amount, which could end up costing you even more in the end.

Credit Repair – When searching for help with debt, you may run across companies who offer credit repair. Credit repair companies work to have negative information removed from credit reports. Fees can be quite high and the ‘repair’ is often temporary, since permanent removal of the negative information isn’t guaranteed. While you may see a temporary bump in your credit score while items are being disputed, credit repair is far from a permanent solution to negative credit issues.

Debt Consolidation — Consolidating multiple credit card payments with varying interest rates  into one lower interest rate loan can be a solution to paying off your credit card debt. However, it’s typically only available to consumers with good or excellent credit. If you have any history of late payments or you’re maxed out on multiple cards, you may not quality for a lower rate debt consolidation loan.

Learn more about the differences between debt settlement and debt management

See how the credit repair process works

See what clients who have successfully completed a debt management plan have to say about their experience.

The Road to Debt Free Financial Freedom

Nonprofit credit counseling is the first step to getting out of debt and on the road to financial freedom. Whether or not you choose to participate in a debt management plan, credit counseling will help you better understand your current credit card debt situation and how to proceed so you can make progress toward becoming debt free.

Get started now, by phone at 866.528.0588 or complete your online financial review.

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