Need to spring clean your credit card debt? Here's how to do it.
As winter thaws into spring, many of us feel inspired to declutter our homes and refresh our living spaces. But what about our finances? Just like that junk drawer or overstuffed closet, credit card debt can accumulate quietly in the background until it becomes an overwhelming burden, which can be quite risky in today's high-rate, high-balance landscape.
Right now, the average American carries nearly $8,000 in credit card debt, and credit card rates are averaging nearly 23% in today's economic climate. That kind of balance, especially at today's rates, can be a heavy burden to carry, and the weight of credit card debt isn't just financial — it's often emotional, too. Watching your balances grow month after month, despite making payments, is stressful, especially if you don't have a clear way out.
Like spring cleaning your home, though, tackling credit card debt requires an honest assessment, a practical strategy and, at times, a bit of elbow grease. Whether you're dealing with a manageable amount of card debt or what seems like an avalanche of debt, there are some concrete steps you can take to make progress.
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How to spring clean your credit card debt this year
When it comes to cleaning up credit card debt this spring, there are two primary paths you can take: the do-it-yourself (DIY) route and professional debt relief solutions. Each has its advantages and disadvantages, depending on your financial situation.
DIY debt reduction methods
One option you have for spring cleaning your credit card debt is to use the snowball or avalanche methods to better tackle the repayment process. The snowball method involves paying off the smallest debt first while making minimum payments on the rest. Once the smallest debt is gone, move on to the next smallest. The avalanche method, on the other hand, focuses on tackling the highest-interest debt first, saving more money in the long run.
You can also negotiate with your creditors to try and reduce what's owed. Many credit card companies are open to negotiation, and you may be able to lower your interest rate, waive late fees or set up a more manageable repayment plan just by asking. Or, if you're struggling to make payments due to a temporary issue, like a job loss or medical problem, contact your creditor before missing the payment due date. They may enroll you in a credit card hardship program, which would reduce your fees, lower your rate or pause your payments temporarily.
Another option is to consider a balance transfer card. If you have a good credit score, a 0% APR balance transfer card could help. These cards offer a period (typically up to 21 months) of no interest on transferred balances, allowing you to pay off debt faster. Just be mindful of balance transfer fees and make sure you can pay off the balance before the promotional period ends, as rates can skyrocket afterward.
Or, you may want to consolidate your debt instead. A debt consolidation loan with a lower rate can be used to pay off high-rate credit card balances, leaving you with one fixed monthly payment and less interest. This works best for those who can secure a lower interest rate than their existing credit cards.
Speak to a debt relief expert about the strategies that could work for you.
Professional credit card debt relief options
Credit counselors can help you find structured ways to repay your debt. A credit counseling agency can help you create a debt management plan, for example, and they may negotiate lower interest rates and fees with your creditors, making your payments more manageable. However, you may have to close credit card accounts as part of the program, which could temporarily impact your credit score.
Debt forgiveness (also known as debt settlement) is another option. While you can take a DIY approach to settling your debt, many cardholders opt to work with a debt relief company to negotiate with their creditors and reduce their total balance in exchange for a lump-sum payment. But while this can significantly lower your debt, it often damages your credit score and may result in tax consequences, so it's generally best for those facing financial hardship who cannot afford to pay the full amount owed.
If your debt is unmanageable and you've exhausted all other options, filing for bankruptcy can provide relief. Chapter 7 bankruptcy can discharge most debts, while Chapter 13 restructures them into a manageable repayment plan. However, bankruptcy has long-term consequences, including a significant impact on your credit for up to 10 years, so it's important to consider this only after you've exhausted your other options.
The bottom line
Credit card debt can feel overwhelming, but just like tidying up your home this spring, small, consistent efforts can lead to big changes. After all, spring cleaning your credit card debt isn't just about paying off balances — it's about setting yourself up for a healthier financial future. But whether you choose a DIY approach or seek professional help, it's important to start the process now by assessing your financial situation, creating a plan and staying committed to your goals.