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dig yourself out high rate credit card debt is a big decision for your finances, but in many cases it can leave you feeling like you’re stuck in quicksand. The more you try to escape, the deeper you sink, especially as interest charges pile up over time. And with average credit card interest rates hovering above 23% Currently – an all-time high – even modest balances can quickly turn into a crushing financial burden.
However, the average household does not currently have a modest balance. Cardholders carry, on average, a credit card balance of around $8,000 and Americans collectively have about $1.14 trillion in card debt Currently. Given today’s record card rates and high average balances that many cardholders are facing, it’s easy to understand how this type of debt can spiral out of control.
For example, if you have the average credit card balance ($8,000) and your interest rate is 23%, you would pay about $152.62 in interest fees alone each month. This can be quite hard on your budget. The good news, however, is that there is strategies you can use to help you become credit card debt free without destroying your credit score in the process.
Learn more about your debt relief options here.
How to Get Rid of Credit Card Debt Without Ruining Your Credit
Here are some ways to get out of high-interest credit card debt without destroying your credit:
Consolidate your debts with a loan
A debt consolidation loan lets you combine multiple high-interest credit card balances into one loan with a lower interest rate. These loans are typically offered by traditional banks and credit unions and most debt consolidation loans are unsecured, meaning you do not need to provide collateral in exchange for borrowing money. money.
By consolidate your debts with one loan, you’ll have a set schedule to repay your loan and you’ll only have one monthly payment to manage instead of multiple credit card bills. This, in turn, can simplify budgeting and reduce the risk of missed payments. And as long as you make your payments on time, this approach won’t hurt your credit score and it can even improve it by reducing your credit utilization.
Don’t wait any longer to pay off your high-interest credit card debt.
Transfer your balance to a new card
Balance transfer credit cards offer low or 0% introductory interest rates on transferred balances for a set period, usually up to 21 months. By transferring your high-interest balances to one of these cards, you can make interest-free payments during the promotional period, which can speed up the debt repayment process and make it much more profitable. cheaper to repay what you owe.
Be aware, however, that there is generally balance transfer fees (usually around 3-5% of the amount transferred) linked to this option. However, in many cases, these fees are worth paying given the savings you make on interest charges. Plus, consistently paying off the balance on time can help protect and even improve your credit score, which is an added bonus.
Sign up for a debt management plan
A debt management plan is a structured repayment plan arranged by a credit counseling agency. When you enroll in this type of program, the credit counseling agency negotiates with your creditors to lower your interest rates and waive fees. You will then make a monthly payment to the agency, which will distribute the funds to your creditors.
It is important to know, however, that even if debt management may not directly impact your credit score, it requires you to close your credit card accounts, which may initially affect your credit utilization rate and have a slight impact on your score. However, as your debt balance decreases over time, your credit score will generally recover.
Using a debt consolidation program
Debt Consolidation Programs are offered by debt relief companies and work in the same way as debt consolidation loans. With a debt consolidation program, the debt relief company’s third-party lender partner consolidates your credit card debts into one loan with a lower interest rate.
By working directly with a debt relief agency, you can potentially get better terms on your loan and avoid missed paymentswhich is beneficial for your credit score. And, over time, paying off the loan will also help improve your credit utilization rate, which can also have a positive impact on your score.
Get temporary help from a disability assistance program
If your financial situation has changed and you are having difficulty track credit card paymentsConsider calling your creditors and asking for lower interest rates or a temporary reduction in minimum payments. Some credit card companies may also offer hardship support programs which can temporarily reduce or even suspend payments without affecting your credit. If negotiations are successful, it can ease the financial burden you feel and allow you to make payments on time, which protects your credit score.
The essentials
Paying off your credit card debt without harming your credit score can be achievable through careful planning and choosing the right debt reduction strategy. From debt consolidation to working directly with your creditors, there are many paths to financial freedom that won’t leave a negative mark on your credit report. Remember that consistency is key and even small steps can lead to substantial progress. So, by focusing on reducing your debt and keeping your payments on time, you’ll be well on your way to a debt-free future while protecting your credit score.
