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Thanks to the significant challenges presented by the ongoing COVID-19 pandemic, more Americans than ever are struggling financially. With a lot of people out of work due to the staggering number of business closers, many are turning to credit cards to help make ends meet.
According to one recent study, total credit card balances in the United States ballooned to a massive $893 billion as of the first quarter in 2020. People with average or good credit scores ranging from 670 to 739 tend to carry the most debt, with an average of about $9,712 per card.
Thankfully, all hope is not lost. Even if you're currently carrying large balances, there are a number of steps you can take to find the relief that you seek – you just need to keep a few key things in mind along the way.
Getting Out of Credit Card Debt: One Step at a Time
By far, one of the best moves you can make to get out of credit card debt involves using a balance transfer card as strategically as possible. Yes, at this point you're just moving debt from one card to another - but if that balance transfer card doesn't charge interest for a specific length of time (think: six months to a year), you'll be able to continue making payments and still save a large amount of money every month.
Keep in mind, however, that most balance transfer cards charge a fee ranging between 3% and 5% of the total amount that you're transferring. If you're planning on using a balance transfer card to move $2,000, for example, this likely means that you'll have to pay up to $100 for the ability to do so. Be aware of these fees and plan accordingly if this is the move you're going to make.
Note, however, that you'll typically need a credit score of at least 670 in order to get approved for one of these cards with a 0% introductory interest rate. If yours isn't quite at that level yet, you'll likely want to explore other options.
Along the same lines, you could also look into a debt consolidation loan - which is a bit like a personal loan that you specifically use to pay off your credit card debts. Not only could you easily get a loan for a lower interest rate than you're currently paying with your credit cards, but you can also use the money to consolidate many different cards into a single loan. This means you'll also only have one monthly payment to manage, too.
Debt consolidation loans usually have set terms, which can be anywhere from 48 to 60 months. But the major benefit here is that you'll also have a simple, fixed and predictable payment amount that you're responsible for every month - thus making it easier to repay what you owe without stress.
Finally, a lot of people don't realize that you can actually try negotiating your credit card debt with a lot of the major financial lenders out there. Look on your latest statement to find the contact information for your credit card issuer and pick up the phone and give them a call. At the very least, you may be able to negotiate a lower interest rate, reduced monthly payments or both depending on your history with that particular company.
Depending on the situation, you could also try to negotiate what is called a debt settlement, which is when the credit card issuer accepts a single lump sum payment to settle all debts on the card. Note that this isn't always possible, but it certainly won't hurt to ask. The worst they can say is "no," at which point you're free to explore some of the other options on this list.
In the end, it's important to understand that while it is entirely possible to get out of credit card debt, the best thing to do would be to take steps to avoid this situation in the first place. Try to use your credit card the same way you would a debit card - meaning, don't use credit to make purchases that you can't really afford in the first place. If nothing else, try to only make purchases that you know you'll be able to pay off by the time your next statement rolls around. That way, you'll still get all the items you need, and you'll avoid significant interest charges as well.
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