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Getting Relief from Credit Card Debt

Dealing with credit card debt can be super stressful. The high interest rates mean balances keep growing, and it can feel impossible to get ahead. But there are options to find relief. This article breaks down strategies to tackle credit card debt and get your finances back on track.

Understanding Your Credit Card Debt

First, take a close look at your current credit card balances. Log in to each account and see:

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  • The total balance
  • Interest rates
  • Minimum payments
  • Due dates

This info allows you to understand exactly what you owe and how much it’s costing you.For example, if you have a $5,000 balance at 19% APR and a $100 minimum payment, you’ll keep owing interest on most of that balance each month. That really adds up!

Set a Payoff Goal

Once you have the full picture, think about a reasonable timeline to pay off your debt completely. Setting a goal keeps you focused and motivated.Be realistic based on your budget. If you aggressively commit most extra income to credit cards, you could potentially pay off smaller balances in 6-12 months. For larger debts, target 12-24 months for payoff.And track progress! Celebrating small wins helps you stay on target.

Explore Debt Relief Options

There are a few main strategies to tackle credit card balances more quickly:

Debt Management Plans

Non-profit credit counseling agencies like GreenPath offer debt management plans (DMPs). They negotiate with your creditors to possibly lower interest rates. You then make one monthly payment to the agency and they distribute funds to creditors.DMPs provide structure but do have program fees. Make sure terms will actually save you money over just paying cards yourself.

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Balance Transfer Credit Cards

Cards like the Citi Diamond Preferred offer 0% APR for 18+ months on balance transfers. Moving higher-interest balances to these cards stops accrual of interest for over a year so more payments directly hit principal.This pause of interest charges allows you to pay down debt much faster. Just be sure to pay off the full transferred balance before regular APR kicks in.

Debt Consolidation Loans

Banks and credit unions provide debt consolidation loans. They lend you money in a single lump sum to pay off credit card balances. You then owe regular principal and interest payments to that one lender over a fixed term, usually 3-5 years.Interest rates are often lower than credit cards – for example, 10-15% instead of 19-25%. This saves money over time. Lightstream and local banks are options to explore.

Debt Settlement

Debt settlement companies negotiate with creditors to let you pay a lump sum that’s less than your total balance. This can eliminate debt, but has risks like credit damage and getting sued before settlements occur. Vet companies thoroughly before signing up.

Contact Creditors Directly

Before resorting to other solutions, reach out directly to your credit card companies. Explain your financial hardship and ask them to lower interest rates. Approval isn’t guaranteed, but creditors do often grant this request if accounts are in good standing.You can also ask about hardship programs. Major issuers like Chase and Capital One postpone or lower minimum payments for 6-12 months in cases of illness, job loss etc.

Adjust Spending

To put more toward credit cards, look closely at expenses. Track spending to identify wasteful habits or budget areas with room to cut.For example, pack lunch instead of eating out. Or downgrade cable/phone plans. These small daily changes let you pay hundreds more toward high-interest debt each month to hit payoff goals faster.

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Tax Implications

One last note – some of these strategies may count as taxable income. If creditors forgive $1,000+ in debt, they’ll send a 1099-C form to the IRS and you’ll owe taxes on that amount. Always consult a tax pro to understand the reporting requirements and effects on your specific situation.

Start Today

The bottom line is – don’t ignore growing credit card debt. Call creditors right away, pick a payoff strategy that fits your situation, make budget changes to put more money toward balances, and start actively monitoring progress. Consistent effort pays off over time through becoming debt-free!

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