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.
Don’t Charge
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.
