Conquering Credit Card Debt

  • July 10, 2024
  • By Samantha Martinez

Owning a credit card offers many benefits, including building up your credit and making large-scale purchases without worrying about having the cash on hand. Credit cards are also a huge responsibility. When mishandled, one can find themselves dealing with the consequences, materializing in the form of credit card debt.

The words “credit card debt” might cause a surge of anxiety, or even make you physically cringe. The truth is, most adults in the U.S. have at least one credit card to their name, and a 2023 Bankrate survey showed that out of a sample, nearly 50% of them carried some kind of card debt. 

Dealing with card debt is not a fun situation to find yourself in, but looking towards tangible ways to tackle your debt can set you back on track. If you or someone you know find themselves stuck in a rut of credit card debt, looking into these useful tips can help conquer your debt and improve your credit report. 

Keep in Mind Why You’re Using Credit
A common misconception about credit card debt is that all debt is bad– yes, that’s right: some debt can be considered “good”! What is usually meant by “good debt” are purchases made on a credit card that act as an investment in the long-term. Examples of this can look like taking out a student loan to get your degree, or a housing loan to put a down payment on your mortgage. On the contrary, “bad debt” can be seen as making purchases on credit where money is spent frivolously on things that might quickly lose value. 

Something to ask yourself before you borrow is why you are purchasing with credit. Is there something you really need that is likely to increase in value over time, or something you are sure you’ll be able to pay back on time? Or is it something you might be better off saving for and buying in cash? Remember, all debt carries some level of risk, and has its advantages and disadvantages. If you’re trying to improve your credit rating and stay clear of “bad debt,” be mindful about practicing smart borrowing behaviors to help place you ahead.

Changing Your Credit Card Habits
Once you find yourself caught in a cycle of credit card spending, the likelihood of debt increases. Changing these habits can be hard, but not impossible! If you are overspending, (meaning you’re spending more on your credit card than you can afford to pay off each month), try and find the root cause of your spending. If it’s overspending on necessities like food and utility bills, and compensating for a lack of sufficient funds, you can try forming a budget plan, cutting down on costs, or focusing on attaining additional income streams. If your spending happens to be an overload of purchases on non-necessity items, be mindful about the emotions and situations that might be triggering your spending. For many, it could be stress, or a lack of financial awareness on what a realistic budget should look like. Whatever it may be, there are tons of resources that can benefit and assist you in making needed changes in order to build healthy credit card spending habits and reduce your debt.

The “Snowball” And “Avalanche” Methods
If you are unsure of where to start, there are two ways to tackle your credit card debt, known as the snowball and avalanche methods. 

Simply put, the “snowball method” involves paying off your smallest, or lowest debt amounts first. By tackling the smallest debt first, you can effectively work your way towards paying any other debts you have in order from smallest to greatest. This method helps pay off your debts steadily, which can be encouraging and seem more feasible to tackle than trying to pay off everything all at once.

Snowball method step-by-step:

  1. Begin by listing your debt in order from lowest amount, to highest.
  2. Set aside as much extra money as possible to pay off your lowest debt and set some aside to begin paying the minimum required each month on the rest.
  3. Once you’ve paid off the smallest debt amount, move on to the next.
  4. Continue with this method until you’ve eliminated all of your debt!

In contrast, the “avalanche method” focuses on paying off debt with the highest interest first. This method is useful in conquering your credit debt and can even save you money in the long run by prioritizing debt with the highest interest rate from highest to lowest.

Avalanche method step-by-step:

  1. Begin by listing your debt in order from highest interest, to lowest.
  2. Set aside as much extra money as possible to pay off your highest interest debt and set some aside to begin paying the minimum required each month on the rest.
  3. Once you’ve paid off the highest interest debt amount, move on to the next.
  4. Continue with this method until you’ve eliminated all of your debt!

Depending on your financial situation, you can decide on if either of these methods work for you.

Consolidating Your Credit Card Debt
If you are someone with more than one credit card and find yourself struggling to pay multiple balances, something you might consider is debt consolidation.

Part of the reason why credit cards are so hard to pay off are higher interest rates. A benefit to consolidating your credit card debt into a personal loan is that your interest rate on a personal loan is often lower. This can help reduce the time it takes to pay off your credit card debt, and as a result, the amount you pay.

Another benefit is the fixed payment period often offered on a personal loan. This means that if you are making your payments on time, your amount of loan debt will not increase. This differs from a revolving line of credit, which increases your payments as you continue using your credit card. 

The process of consolidating your loans begins with applying for a personal loan through your financial institution or lender. Some debt consolidation loans even offer to pay off your other debts automatically or give you the option to pay them off yourself. Once your pre-existing debts are taken care of, you’ll begin to make payments on your new loan every month.

When handling high-interest credit cards, transferring the balance to another credit card with a lower interest rate could help you end up paying less interest and pay your debt off faster. 

When you transfer your balance to a CoastHills Platinum Rewards Visa® or Encore Visa Signature® credit card, you’ll receive an introductory 3.99% APR1 for the first six months with no balance transfer fees. This could amount to HUGE savings when compared to the average credit card interest rate of around 25% APR. Plus, CoastHills offers no balance transfer fees, while many other credit card companies will charge 3-5% of the balance being moved – which means another chance to save! 

Stay Alert for Debt Relief Scams
Those who are looking for debt relief often find themselves as the victim of debt relief scams. Fraudulent “debt relief companies” reaching out to people seeking relief will make false promises in the hope of taking advantage of and collecting fees from you before following through on anything they’ve promised.

Some warning signs to look out for:

  • They ask for personal or financial information in a demanding tone or unexpected phone call/message
  • They pressure you to make payment up front, without providing any type of legit service
  • They want you to sign some form of written agreement or third-party authorization. In some cases, these companies cut off communication between you and your service provide so you don’t notice charges are being made on your behalf.
  • They promise complete or immediate debt forgiveness/say they are a part of a “new government program” and wish to enroll you without reviewing your financial situation first

We want everyone to stay safe and aware when it comes to the debt relief scams. For additional information, you can check out the Federal Trade Commission or the Consumer Financial Protection Bureau (CFPB).

Take the First Step
Taking the first step towards paying off your credit card debt can feel daunting or like an impossible task, regardless of how much you owe. The sooner you tackle handling your debt, the more time you’ll have to figure out the best way to achieve your financial goals.

Remember that as our financial situations change, our debt relief strategies may change as well. Staying on top of your financial situation and building awareness and resources can allow you to make adjustments to your plan as you go, ultimately making it a smoother and less stressful process. Paying off your debt can take months, even years. Keep in mind that any amount of progress is still progress. Make sure to track this progress and make changes as needed along the way to nurture the future of your financial well-being.

Check out CoastHills’ debt management page and fill out our free financial review form for more support on financial recovery.

1APR= Annual Percentage Rate. 3.99% intro APR for 6 months from the date of first transfer. Existing CoastHills Visa balances not eligible for balance transfer APR. After the intro APR expires, your APR will be calculated using: Prime Rate + Margin of 2.24% to 9.74%, based on your credit worthiness. Not to exceed 17.99%. APR is valid as of July 10, 2024 and subject to change at any time.

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