May 07, 2021
Summary: Thinking you'll never pay off your credit cards? Here's a plan that works and what to do when you've had enough of making credit card payments.
Many people carry the burden of unpaid credit card debt from one month to the other. Most of them are unable to fully settle the balances before they attract high interest. Consequently, many of these people find themselves living and working to pay off their credit card debts.
Such a cycle is stressful and does not get you anywhere near attaining freedom from credit card debts. If this describes your situation, you may need to pay attention to this article to find out what options you have to finally get out of the endless loop of credit card debts.
You may choose to commit to paying your credit card debts every month. But unless you clear all outstanding balances, you may never pay off the debt. It feels good to see the reduced credit card balance when you make your payment. However, the feeling will last just as long until the credit company charges another interest before your monthly billing.
Before you know it, your new credit card debt will shoot back to the amount it was before you made your payment. It may be higher or a little bit lower. On the other hand, if you wait until you can make a lump-sum payment, your credit score will be affected. It is even worse when you have highly valued credit cards.
Credit card debts end up becoming a trap that is difficult to escape. Credit companies will serve you another false hope by pushing you further to pay your debt to save your credit score. While that may work, it will only take you back to the beginning where you don't have money but have a good credit score. It may be tough to resist using credit cards again. After all, you need it, right? That kind of mindset will keep you imprisoned in the credit card debt cycle. You need to change it if you want to find your freedom from such debts.
The best option to clear your credit debts is to pay them off. How to do it is the tricky part. If you have more than one credit card with debts to pay off, you may consider the steps described below to make it easier and quicker to pay them off.
The first thing you want to do is to know your numbers. You need to know how much you owe each credit card company and the interest rate charged on each card. After finding out those important details, you will now arrange the credit debts from the highest interest rates to those with the lowest.
Then, you will need to start paying off each of the debts from the one with the highest interest rates towards those with the lowest. Remember, the higher the interest rates, the higher the debt.
One helpful tip to ensure that you have enough money to pay off the debts is to reduce your expenses where they are not necessary. It will help you save some money and channel it towards credit card bills. It is also a great idea to have an additional source of income to help you get extra money to pay off the debts.
You may decide to pay your credit card payments every month. By now, you probably already know that this option may never get you out of the vicious debt cycle. Your credit score will be unstable, depending on what you owe the creditors and how often you honor the payments. This option keeps you working to clear the additional interest while keeping your balances at bay if you do not continue shopping with your credit card.
If your interest rates are high and you're struggling to pay, you may negotiate with your credit card company. There is no guarantee that your request for a lower interest rate will be granted. But this approach is a great starting point to a debt settlement plan.
You may agree with your credit company to work out a debt settlement plan depending on your situation and the credit card company policies. The company will pay off your debt but on the condition that you make monthly installments until you clear the debts. The downside, however, is that you will not be able to continue using the credit card. The amount you will need to pay back will also be higher than what you owe the company.
If you are late on your payments and can no longer afford to catch up, you may need to stop. After that, debt collectors will review your case. Many people do not pursue this option because they worry too much about their credit scores, debt stigma, and the unending phone calls from debt collectors. But it makes much more sense when your credit card has been maxed out because you can only afford to make minimal payments to the card.
If you forfeit payment for a certain period of months, the credit company may close your credit line. They will keep persuading you to make payments before they decide to forward your information to debt collectors. Typically, credit companies charge off bad debts. Most of the time, these debts may be sold off cheaply to debt collectors.
At this point, the credit card company may list you among debt defaulters. This kind of credit report does not change even when you finally pay off the debt. (This is when you need to stop paying the debt). Debt collectors are often harsh and may even threaten to take legal action against you. This tactic usually works for them; after all, it is their job to do everything possible to reclaim the money.
The good news is that the Fair Debt Collection Practices Act has laws that protect you from harassment by debt collectors. Each state also has statutory law limiting the time frame when a collector can sue you for the payment. You may approach the collectors and negotiate to clear the debt with a less amount than you owe.
The agreement must be done in writing to ensure that the debt is omitted from your credit report. You may also wait for up to seven years before your debt is removed from your credit report.
If you are feeling overwhelmed and stressed out due to unpaid credit card bills, an auto loan, and other debts, it is important to take a step back and take action to protect your mental health. It is also important to understand that you have options available to address and resolve your debts.
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Here's a list of guides for other states.
Being sued by a different debt collector? We're making guides on how to beat each one.
Is your credit card company suing you? Learn how you can beat each one.
Need more info on statutes of limitations? Read our 50-state guide.
Need help managing your finances? Check out these resources.