#CreditCardReductionDay 2017: How to Get a Grip on Credit Card Debt When All Seems Lost

 

Louis hosting a financial literacy workshop in the community

Credit card debt is like a mosquito, always bugging you and leaving a big scar. While it may seem that the burden of credit card debt is overwhelming, there are ways of dealing with it successfully. However, true solutions usually need time and effort. That said, hope should never be lost. It is possible to go from drowning in debt to not owing a single dime.

 

The first step in reducing credit card debt is knowing what you owe.  Most times, the concerns of daily life prevent us from knowing everything that is happening with our finances. You cannot fix a problem if you do not know what the problem is. You can either go through your most recent credit card statements or look at your credit reports (going to annualcreditreport.com or calling 877-322-8228 are the only government-approved ways to get the free copies of your credit reports that you are entitled to by law every 12 months).

Once you know what you owe, the next step is figuring out what you can afford to pay. All credit cards have minimum payment amounts, but if you can afford to pay more, you will decrease your debt in far less time. Higher payments mean less interest being charged over time. Paying off your highest-interest cards first reduces the interest charged. Something else that works for some people is to pay off the lowest balances first (regardless of interest rate) so they can see balances disappearing, which motivates them to continue paying down debt. Needless to say, if you are already in credit card debt, you want to avoid taking on new card debt if possible. Also, every six months, ask your credit card companies for an interest rate reduction. A March 2016 survey from CreditCards.com found that 78% of cardholders who asked for a rate cut received one.

While the preceding advice works if you can afford to make payments, if you cannot, you have options as well. At times you can not make minimum payments, contact your credit card company to explain your situation and request reduced payments or a payment delay until your situation improves. However, if your financial difficulties are longer-term or if you have already missed payments and are dealing with a collection agency, then there are things to consider. You should think about working out a repayment plan that will settle the debt for a lower amount or filing for bankruptcy. Before you file for bankruptcy, it is a good idea to consult a financial or legal professional. If you call the city’s 311 helpline, they will direct you to your local New York City Financial Empowerment Center. These centers provide financial counseling for free.

When it comes to tackling credit card debt, it is vital to know that there are concrete steps you can take no matter what your particular situations are. If left alone, credit card debt just grows and becomes worse. There is no better time than the present to confront the debt head-on and let it know that you will not back down until it is gone.

-Louis Guzman, The Family Center Legal Wellness Institute Economic Justice Advocate

To learn more about the Economic Justice Project at The Family Center, click here.

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