Credit card debt is a serious issue for many American families and can become a long-term problem if not addressed promptly. Because the interest on outstanding credit account balances is compounded on a daily or monthly basis, the total amount due can quickly grow to an unmanageable level and can create financial issues that may seem impossible to resolve. By taking a few simple steps, however, families can often reduce their credit card debt and remove this source of stress to increase their financial stability.
Evaluate the Problem
For many families, even discussing the issue of credit card debt can be a painful process. Taking a hard look at the size and extent of the problem, however, can be t1he first step toward resolving it. By determining the actual amount owed and the current monthly payments on each outstanding credit account, consumers can establish a baseline financial situation from which to build a brighter economic future.
Compare Interest Rates
Credit cards with higher interest rates cost more over the life of the loan. It makes good financial sense to eliminate these debts first and to refrain from charging any items on high-interest credit cards. By paying off these balances, families can make a healthy dent in their outstanding debts and can prevent high interest charges from compounding to create added amounts due. Once one credit card balance has been paid off, consumers can move to the next until all outstanding credit accounts have been resolved.
It is vital not to accrue any additional credit card debt during this period. Trading one set of credit card problems for another will only prolong the cycle of debt and will result in further interest charges and excessive monthly payments. Resist the urge to acquire and use new credit cards or lines of credit. Instead, find ways to save for financial goals or to do without luxuries until the debt situation has been resolved.
Negotiate a Positive Solution
In some cases, credit card companies may be willing to suspend the compounding of interest or to reduce the amount owed on an outstanding account. Unfortunately, some lenders require that the account be in default prior to any negotiations and settlement offers. By contacting the company directly and asking for help in reducing or resolving the outstanding debt, consumers can sometimes achieve surprisingly positive outcomes for their credit card woes.
Don’t Close Paid-Off Accounts
It may be tempting to close accounts that have zero balances and are no longer creating financial problems; however, credit ratings are based in part on the amount of unused credit available for use. By closing accounts that are no longer in use, consumers can actually lower their credit scores and reduce their chances of obtaining loans in the future. Leaving these accounts open but unused is a much more positive way to manage the credit score conundrum for most families.
By taking steps to address credit card debt effectively, consumers can ensure greater peace of mind and a more positive financial future for themselves and for their families.