Credit card debt can be difficult to manage, but there are ways you can reduce it. Try debt consolidation loans or the “debt snowball strategy.”
Working with a debt management agency or choosing to settle debt can also be effective solutions; just be mindful that such steps could affect your credit rating adversely.
1. Close Your Credit Cards
Cancelling a credit card can be for many different reasons, from costing more than it’s worth and encouraging overspending to simply wanting to reduce the number of cards in your wallet. While cancelling one may seem simple enough at first, doing so has implications on your credit score so it’s essential that all factors involved are carefully considered before taking this course of action.
Under certain conditions, closing a credit card may make sense; such as an expensive annual fee or when using it only occasionally with no balance remaining; closing accounts also helps when applying for new credit such as auto loans or mortgages, so you need history from all accounts open when applying. Otherwise, it’s wiser to try other means first of curbing overspending rather than cancelling cards entirely; leaving it at home when shopping could help manage expenses more effectively;
2. Negotiate With Your Creditors
Credit card companies expect you to repay what you charge, but if your payments become delinquent they may offer assistance in creating a repayment plan with lower payments or interest rate payments or negotiate a lump sum settlement for less than what is owed.
Successful debt negotiations require approaching your credit card company with an understanding of what your goals are and a specific request in mind, such as asking to have late fees forgiven or reduce interest rate; that will only open the door for negotiations that don’t meet those objectives.
Negotiation should always be handled politely and persistently. Keep records of your conversations, including any agreements in writing. Keep in mind that debt settlement may have negative repercussions for your credit report, so this solution should only ever be considered as a last resort.
3. Start a Debt Management Plan
Credit counseling agencies can help you set up and negotiate lower interest rates on debt management plans, and negotiate lower monthly interest payments. Debt management plans may only be appropriate for people who have some extra cash each month after paying their basic living expenses like rent, mortgage payment, utility bills and council tax bills. Before enrolling in one it’s essential to seek independent advice such as Advice NI before making this decision.
Reducing nonessential spending and using that savings toward debt reduction is also recommended. Try tracking your expenses over one month with a notebook, spreadsheet or app – this will give you an accurate picture of where your money is going and will allow you to determine exactly how much remains unpaid towards paying down debts like credit and store cards. A debt management plan typically only addresses non-priority debts like these.
4. Work With a Credit Counseling Agency
Credit counseling agencies can help you create a budget, reduce debt and return your finances back on track. They will communicate directly with creditors on your behalf in order to negotiate lower interest rates or consolidate multiple monthly bills into one payment each month.
However, it’s essential that you select an official credit counseling agency. Make sure it’s recognized by the National Foundation for Credit Counseling (NFCC) and has a solid track record in ethical practices; try to steer clear from firms requiring up-front fees or promising to erase negative items from your report.
On your initial counseling session, the counselor should assess your financial situation and suggest strategies that could assist. They might include creating a Debt Management Plan or DMP; debt settlement; student loan counseling or bankruptcy as possible solutions. Furthermore, educational materials or workshops on money management and using credit responsibly should also be provided.